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KOBUS HARDWARE You are provided with information relating to Kobus Hardware, owned by Kobus Groenewald - NSC Accounting - Question 6 - 2016 - Paper 1
Question 6
KOBUS HARDWARE You are provided with information relating to Kobus Hardware, owned by Kobus Groenewald. REQUIRED: 6.1.1 Calculate the missing amounts indicated by... show full transcript
Worked Solution & Example Answer:KOBUS HARDWARE You are provided with information relating to Kobus Hardware, owned by Kobus Groenewald - NSC Accounting - Question 6 - 2016 - Paper 1
Step 1
Calculate the missing amounts indicated by (a) to (e) in the Cash Budget for March and April 2016.
Answer
To determine the missing amounts in the Cash Budget for March and April 2016, we will use the following calculations:
-
(a) For the amount indicated by
28000 + 7 rac{9}{100} * 240000, we calculate: $$240000 = 28000 + 7\frac{9}{100} * 240000240 000$. -
(b) For the amount indicated by
R28250 * 90 / 100, this calculates to: $$R254 250 = R28250 * 90 / 100$. -
(c) For the missing amount calculated as
6000 * 2 + 105 rac{5}{100}, we get: $$6330 = 6000 * 2 + 105\frac{5}{100}$. -
(d) The amount indicated as
180000 + 24gives: $$ R7500 = 180000 + 24$. -
(e) The last missing amount represented by
180000 * 10.5 rac{5}{100} * 1/12results to: $$R1575.10 = 180000 * 10.5\frac{5}{100} * 1/12$.
Step 2
Complete the Debtors' Collection Schedule for April 2016.
Answer
To complete the Debtors' Collection Schedule for April 2016, we will use the given collection percentages and sales data:
- For February: Credit Sales are .
- For March: Credit Sales are , and are collected in the same month.
- For April,
68 400from March and80 000credit sales leads to the calculation of expected collections: $$ 68 400 = 160000 * 45 rac{5}{100}$, - Finally, for April: Based on collections, we find:
- Expected collection:
7161. - Total for April = 144 400 collected & 147 716 remaining.
- Expected collection:
Step 3
Calculate the percentage increase in sundry expenses.
Answer
To find the percentage increase in sundry expenses, we begin with the following calculation:
egin{align*}
ext{Previous Amount} & = 87600\
ext{Current Amount} & = 89790\
ext{Increase} & = 89790 - 87600 = 2190\
ext{Percentage Increase} & = \left(\frac{2190}{87600}\right) * 100 = 2.5%
\end{align*}
Thus, the percentage increase in sundry expenses is 2.5%.
Step 4
The Cash Budget for March and April 2016 indicates that this business will face serious financial difficulties. Identify TWO items to support this statement. Quote relevant figures.
Answer
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Overdraft in March and April: The business exceeded its overdraft limit, stating it was R75,300 for March and R44,900 for April. This indicates cash flow issues as they exceed the set limit.
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Acquisition costs: The company plans to acquire an item worth R180,000 in April 2016, suggesting further strain on finances, especially if cash flow is already an issue.
Step 5
Explain why each of the items reflects a problem for the business. State TWO points in EACH case.
Answer
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Collection from debtors:
- Collections are much lower than expected, affecting liquidity.
- High levels of debtors indicates poor internal credit management.
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Payments to creditors:
- Suppliers are unwilling to send stock, directly affecting sales.
- Poor credit rating due to delayed payments further complicates financial operations.
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Insurance:
- The risk of going uninsured impacts future operations due to potential business loss.
- Increased premiums may arise, straining the budget further.
-
Drawings:
- Excessive personal withdrawals reduce available cash for business operations.
- It may lead to an unsustainable overall financial position, increasing the risk of business failure.