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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:
(i) Given that total sales in May amount to R41,250, and 38% of those are expected to settle, we calculate:
ext{Amount} = R41,250 imes rac{38}{100} = R15,675(ii) For June, the missing amount is calculated based on R25,056 in sales:
ext{Amount} = R25,056 imes rac{100}{96} = R26,001.67 ext{ (rounded to } R26,002)Thus, the missing amounts are R15,675 and R26,002.
Step 2
Calculate the percentage discount allowed to debtors who settle in the month of the sales transactions.
Answer
To determine the percentage discount for debtors settling in the same month:
ext{Percentage Discount} = rac{24,750 - 23,760}{24,750} imes 100 = 4\\%Therefore, the percentage discount allowed to these debtors is 4%.
Step 3
Step 4
Give a valid reason for EACH overpayment identified, to support their decisions.
Answer
The reasons for the overpayments are as follows:
- Advertising: The increase was intended to boost sales or cater to special clearance sales that required greater advertising efforts.
- Vehicle maintenance: The excess payment was made to ensure a repair price remained in line with the market rate, given the frequent use of vehicles and the need for reliable operational capacity.
Step 5
Why are the auditors concerned that the agreement with Tradecor is unethical or possibly a crime? Explain THREE points.
Answer
The auditors have several concerns regarding the agreement with Tradecor:
- The property was sold at a price significantly below market value, raising red flags about the transaction's legitimacy.
- Historical records show that the asset was previously valued much higher, indicating potential misrepresentation.
- There is a conflict of interest as John Peters, the CEO, stands to benefit personally from the transaction, compromising ethical standards.