Orbit Limited : Statement of Financial Position as at 31 December 20222021Non-current AssetsR11 810 000R7 560 000Property, Plant, EquipmentR10 025 000R6 250 000InvestmentsR1 785 000R1 310 000Current AssetsR4 190 000R4 690 000InventoriesR 1 875 000R2 350 000Account ReceivableR1 925 000R2 200 000CashR390 000R140 000Toatal AssetsR16 000 000R12 250 000Equities & Liabilities Equity??Oridanary share capitalR5 480 000R3 680 000Retained earnings??Non-current LiabilitiesR4 500 000R3 800 000Loan (20% p.a)R4 500 000R3 800 000Current LiabilitiesR2 300 000R1 500 000Accounts payable?R2 300 000R1 500 000 Calculate the increase in the retained earnings over the two-year period. Total equity and liabilitiesStatement of Comprehensive Income for the year ended 31 December:SalesCost of salesGross profitOperating expensesDepreciationOther selling, general and administrative expensesOperating profitInvestment incomeInterest expenseProfit before taxCompany taxProfit after tax16 000 000R10 800 000(6 000 000)4 800 000(1 800 000)580 0001 220 000hp3 000 000?(880 000)2 600 000(728 000)1 872 00012 250 0002021R7 150 000(3 650 000)3 500 000(1 200 000)200 0001 000 00002 300 000?(600 000)2 030 000(568 400)1461 600In addition to the above, the following information is available:All sales and purchases of inventory are on credit. Inventories on 31 December 2020 amounted to R1500 000. Credit terms of 5/10 net 90 days are granted by creditors. Credit terms of 60 days are granted todebtors. Dividends declared for the years ended 31 December 2021 and 2022 amounted to R1 169 280 andR1 422 000 respectively.The financial manager of Orbit Limited provided the following forecasts for 2023:Sales are estimated at 8 000 units with a selling price of R1 800 each. The manufacturing costs include directmaterials of R460 per unit, direct labour of R315 per unit, variable overheads of R170 per unit and fixedoverheads of R880 000. Fixed selling and administration costs are estimated at R2 000 000 and the variableselling costs are estimated to be 7.5% of sales.The directors are contemplating diversification in 2024 by entering the passenger transport market. This couldbe achieved through the purchase of a fleet of midi buses that are expected to cost R9 500 000. An additionalR500 000 will be spent on import duties. The cost of operating the buses each year is expected to be R4100 000 and the annual revenues from transporting the passengers are estimated at R7 000 000. The buses are expected to have a total salvage value of R1 000 000 and the estimated useful life of the buses is fiveyears. The company's cost of capital is expected to reduce to 15%. Depreciation is calculated using thestraight-line method.

Retained earnings which is the profit available to the company which has not yet paid so this amount…

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Orbit Limited : Statement of Financial Position as at 31 December

	2022	2021
Non-current Assets	R11 810 000	R7 560 000
Property, Plant, Equipment	R10 025 000	R6 250 000
Investments	R1 785 000	R1 310 000
Current Assets	R4 190 000	R4 690 000
Inventories	R 1 875 000	R2 350 000
Account Receivable	R1 925 000	R2 200 000
Cash	R390 000	R140 000
Toatal Assets	R16 000 000	R12 250 000
Equities & Liabilities

Equity	?	?
Oridanary share capital	R5 480 000	R3 680 000
Retained earnings	?	?
Non-current Liabilities	R4 500 000	R3 800 000
Loan (20% p.a)	R4 500 000	R3 800 000
Current Liabilities	R2 300 000	R1 500 000
Accounts payable?	R2 300 000	R1 500 000

Calculate the increase in the retained earnings over the two-year period.

Total equity and liabilities
Statement of Comprehensive Income for the year ended 31 December:
Sales
Cost of sales
Gross profit
Operating expenses
Depreciation
Other selling, general and administrative expenses
Operating profit
Investment income
Interest expense
Profit before tax
Company tax
Profit after tax
16 000 000
R
10 800 000
(6 000 000)
4 800 000
(1 800 000)
580 000
1 220 000
hp
3 000 000
?
(880 000)
2 600 000
(728 000)
1 872 000
12 250 000
2021
R
7 150 000
(3 650 000)
3 500 000
(1 200 000)
200 000
1 000 0000
2 300 000
?
(600 000)
2 030 000
(568 400)
1461 600
In addition to the above, the following information is available:
All sales and purchases of inventory are on credit. Inventories on 31 December 2020 amounted to R1
500 000. Credit terms of 5/10 net 90 days are granted by creditors. Credit terms of 60 days are granted to
debtors. Dividends declared for the years ended 31 December 2021 and 2022 amounted to R1 169 280 and
R1 422 000 respectively.
The financial manager of Orbit Limited provided the following forecasts for 2023:
Sales are estimated at 8 000 units with a selling price of R1 800 each. The manufacturing costs include direct
materials of R460 per unit, direct labour of R315 per unit, variable overheads of R170 per unit and fixed
overheads of R880 000. Fixed selling and administration costs are estimated at R2 000 000 and the variable
selling costs are estimated to be 7.5% of sales.
The directors are contemplating diversification in 2024 by entering the passenger transport market. This could
be achieved through the purchase of a fleet of midi buses that are expected to cost R9 500 000. An additional
R500 000 will be spent on import duties. The cost of operating the buses each year is expected to be R4
100 000 and the annual revenues from transporting the passengers are estimated at R7 000 000. The buses

are expected to have a total salvage value of R1 000 000 and the estimated useful life of the buses is five
years. The company's cost of capital is expected to reduce to 15%. Depreciation is calculated using the
straight-line method.

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