You are provided with information relating to Magic Traders - NSC Accounting - Question 6 - 2018 - Paper 1

The main purpose of a Projected Income Statement is to project an estimate of future revenues and expenses, allowing the business to anticipate expected profits or losses over a given period. This information is crucial for financial planning and decision-making.

To complete the Debtors' Collection Schedule for June 2018, we determine the amounts receivable from credit sales in prior months. From March sales, we expect to collect 30% in June, equaling R15,600. From April, we expect R51,300, and from May, we expect R108,000. This totals R195,480.

The discount allowed for May is calculated based on total credit sales of R180,000. The discount at 30% would be R54,000. However, we consider the amount collected in May, which resulted in a discount of R2,700.

For bad debts written off in June 2018, we apply the formula of 1% of total sales from March, which amounts to R2,520.

The cash sales for May 2018 are calculated by subtracting the credit sales from total sales. With total sales of R300,000 and credit sales of R180,000, the cash sales equal R120,000.

The payment to creditors in June 2018 can be calculated by applying the ratio of cash sales. If total purchases were R300,000 with a proportionality of 100%, the payment to creditors is R160,000.

The salaries for May 2018 are calculated based on the total wages of cleaners and other staff. For the analysis, if the total salaries sum up to R133,400, we ensure accuracy by checking all components.

Tony is not concerned about the overspending in advertising as it directly correlates with increased sales. The advertising expenses rose by R3,000, yet this led to sales increasing by R96,000, indicating the effectiveness of the advertising strategy.

One consequence of not paying the creditors is that credit may be stopped, which could lead to a halt in receiving supplies necessary for business operations.

One point in favor of appointing Gentex Cleaning Services is their ability to provide specialized cleaning services tailored to business needs. Additionally, they offer reliable services that can enhance the overall cleanliness and presentation of the business.

One point to consider before making this decision is the existing contract with current cleaning service providers, ensuring that the transition does not disrupt operations.