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KURUMAN (PTY) LTD John Peters is the majority shareholder and CEO - NSC Accounting - Question 6 - 2020
Question 6
KURUMAN (PTY) LTD John Peters is the majority shareholder and CEO. You are provided with information for the period ending 31 July 2020. There are five other shareh... show full transcript
Worked Solution & Example Answer:KURUMAN (PTY) LTD John Peters is the majority shareholder and CEO - NSC Accounting - Question 6 - 2020
Step 1
Calculate the missing amounts indicated by (i) and (ii) in the Debtors' Collection Schedule.
Answer
To calculate the missing amounts in the Debtors' Collection Schedule, follow these steps:
(i) For May: The amount is calculated as follows:
- Given: 60% of sales settle in the same month.
- Sales in May = R 41 250
- Thus,
41 250 imes rac{60}{100} = R 24 750
The missing amount for May is R 24 750. Thus the total collection from debtors in May would be
(ii) For June, the calculation is:
- Given: 38% of sales settle in the next month.
- Sales in June = R 23 760
- Thus,
23 760 imes rac{38}{100} = R 9 024.80
The missing amount for June is R 9 024.80.
Step 2
Calculate the following budgeted amounts:
Answer
- Total sales for July 2020:
To get the total sales for July, we consider the budgeted amount provided. The estimated total sales data indicates:
- Sales for July = R 144 000.
Therefore, the Total Sales for July is R 144 000.
- Payment to creditors during June 2020:
The payment to creditors in June is derived from the debt repaid, which can be calculated as:
- Budgeted Payment = R 88 000.
So, the payment to creditors during June is R 88 000.
- Additional loan to be acquired on 1 June 2020:
- The additional loan is specified as R 90 000, as per the loan terms available.
Step 3
Identify TWO overpayments in May 2020. Provide figures.
Answer
- Overpayment on Advertising:
- Amount: Paid R 8 400 or R 2 800 more than budgeted.
- This indicates an overpayment of more than 50% over the budgeted amount.
- Overpayment on Vehicle Maintenance:
- Amount: Paid R 36 350 or R 24 150 more than the budgeted value.
- This overpayment was over budget by about 198%.
Step 4
Why are the auditors concerned that the agreement with Tradecor is unethical or possibly a crime? Explain THREE points.
Answer
- Historical Cost Violation:
The property was sold at carrying value, which is its original cost; this raises concerns regarding transparency and real market value.
- Market-Related Price Issues:
If the property is significantly undervalued in the market, it reflects poorly on the company’s financial health.
- Asset Disposal Concerns:
The agreement indicates that the asset is being improperly disposed of, potentially affecting the financial statements misleadingly.