Assignment Task:

CCC Manufacturing (Pty) Ltd - Case study
Imagine it is mid-December 2012.

Colin Cameron is the majority shareholder and managing director of CCC Manufacturing (Pty) Ltd. The small manufacturing unit has been in operation for about four years and is now the market leader in the production of IRAT conductors, its only product.

While everything appears to be going well, Cameron is suspecting that the market is becoming saturated and that further growth in sales is unlikely.

He is particularly concerned, as CCC has recently spent a large amount on a factory extension that is now operating well below capacity. The extension was financed primarily by borrowings, which has placed the company in a significant amount of debt.

Cameron hates owing money and is worried about servicing the borrowings if there is no room in the market for serious sales growth.

Due to stress, the financial manager has resigned just before the holiday season shutdown. Cameron comes to you and asks you to prepare financial statements for the year ended 31 December 2012.

31 December 2012 year-end information

The bookkeeper supplies the following information for the year ended 31 December 2012

  • Sales of IRAT conductors for the year has been 6,000 units. These have all been sold on credit for R35 each and have cost the company R14 each to produce.
  • Debtors took an average of 41 days to settle their accounts.
  • CCC has an authorised share capital of R100,000 of which only 20,000 shares of R1 each were issued when the company was started in 2007.
  • Administration and general expenses for the year amount to R10,000.
  • Sales and marketing costs are 8% of turnover.
  • Stock on hand as at 31 December 2012 is valued at R8,400 and the amount owed to suppliers for stock received comes to R13,348.
  • At the end of 2012, the net book value (NBV) of fixed assets is R250,000 and depreciation of R24,200 has been charged for the year.
  • The prevailing corporate tax rate is 30% and is not expected to change over the next few years.
  • The retained profit (retained earnings) brought forward from the end of 2011 is R103,207 and the shareholders have an agreement that ¼ of all earnings after tax will be paid out as dividends every year.
  • Long-term (L-T) debt outstanding at year-end equals R115,000 and the total interest paid during the year is R13,200.
  • Cash on hand at 31 December 2012 is confirmed at R2,011 and the company has no bank overdraft.

 

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  • Posted on : June 06th, 2019

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