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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 complete the Debtors' Collection Schedule, we need to calculate the amounts for (i) and (ii).
(i) The missing amount from May can be calculated as follows:
Amount = R41 250 × 38/100 = R15 675
(ii) For June, the calculation is:
OR R25 056 = 100 / 100 × (Debtors Total for June - Debtors Total for May)
So, using the totals:
R25 056 = OR R130 500 × 25/75
Thus, the values are R15 675 and R43 500 respectively.
Step 2
Calculate the percentage discount allowed to debtors who settle in the month of the sales transactions.
Answer
To find the percentage discount for debtors settling in the month of the sale:
Percentage Discount = (Total Expected Sales - Cash Sales) / Total Expected Sales × 100.
From the data provided, we calculate:
Total Expected Sales = R24 750,
Cash Sales = R23 760.
Discount = (24 750 - 23 760) / 24 750 × 100 = 4%.
Step 3
Step 4
Give a valid reason for EACH overpayment identified, to support their decisions.
Answer
Reason for Advertising Overpayment: The directors wanted to increase sales or needed special clearance sales which required greater advertising.
Reason for Vehicle Maintenance Overpayment: To obtain a reasonable price when the vehicle was sold, or vehicles needed more frequent free deliveries to increase sales.
Step 5
Why are the auditors concerned that the agreement with Tradecor is unethical or possibly a crime? Explain THREE points.
Answer
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The property was sold at carrying value, which is its original price, indicating it may not reflect its market value.
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Market value concerns about the property suggest potential undervaluation, affecting asset disposal interest.
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The potential conflict of interest between John Peters as CEO and Tradecor raises questions on decision-making processes concerning asset disposal.