South Africa

REQUIRED
Use the following information to prepare the Pro Forma Statement of Financial Position of Govan Limited as at 31 December 2021
INFORMATION
• Sales for 2020 amounted to R4 000 000. Seventy percent (70%) of the sales were for cash and the balance on credit. The cash sales for 2021 are expected to increase by 30% whilst the credit sales are expected to increase by 40%.
• Total purchases (all credit) are expected to amount to R3 000 000.
• Trade and other receivables must be calculated using the percentage-of-sales method
• Accounts payable is based on a payment period of 73 days
• The company maintains a fixed inventory level of R2 000 000 at the end of each month
• Govan Limited expects to show a net decrease in cash of R200 000 during 2021.
• Equipment with a cost price of R800 000 and accumulated depreciation of R600 000 is expected to be sold at the end of 2021 for R300 000. Additional property with a cost of R4 000 000 will be purchased during 2021. Total depreciation for 2021 is estimated at R800 000.
• 200 000 ordinary shares are expected to be sold at R3 each during January 2021.
• The company predicts a 20% profit margin (net profit margin).
• Dividends of R500 000 are expected to be paid by the company during 2021.
• R1 000 000 will be paid to Jip Bank during 2021. This includes R300 000 for interest on loan.
• The amount of external non-current funding required must be calculated.

GOVAN LIMITED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2020
ASSETS
Non-current assets 6 000 000

Fixed /Tangible assets 6 000 000
Current assets 3 840 000
Inventories 2 000 000
Trade and other receivables 1 680 000
Cash and cash equivalents 1 600 00
Total assets 9 840 000
EQUITY AND LIABILITIES
Shareholders’equity 4 680 000
Ordinary share capital 3 300 000
Retained earnings 1 380 000
Non-current liabilities 4 000 000
Long-term loan (Jip Bank) 4 000 000
Current liabilities 1 160 000
Trade and other payables 1 160 000
Total equity and liabilities 9 840 000