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 estimate expected revenues and expenses for a future period, providing a basis for planning and decision-making. It helps in evaluating the profitability of the business.

The Debtors' Collection Schedule for June 2018 should include the following:

• March 2018: 252,000
• April 2018: 288,000
• May 2018: 180,000
• Total credit sales for June: 108,000
• Cash from debtors: 195,480

To calculate the discount allowed for May 2018, use the formula:

ext{Discount} = rac{ ext{Credit Sales} imes ext{Discount Rate}}{100}

Thus, using the figures provided, discount = 180,000 x 30% = 54,000.

The formula for calculating bad debts written off is:

overline{1 ext{Bad debts}} = ext{Sales amount} imes ext{Bad debt rate}

So, using March's figures: Bad debts = 252,000 x 1% = 2,520.

Using the information that cash sales = Total sales - Credit sales:

Cash Sales = 300,000 - 180,000 = 120,000.

To calculate payment to creditors for June:

If total amount is 300,000 with a 100/150 base, it gives a total creditor payment of 160,000.

To calculate salaries for May:

Total salaries = (14 x 150) + (26 x 100) = 133,400.

Tony is not concerned about overspending in advertising as it has positively impacted sales. For instance, advertising expenditure increased by R3,000, which correlated with a significant sales increase of R96,000, hence proving to be an effective investment.

One consequence could be that the credit terms of the business will deteriorate, leading to an increased cost of credit or potentially being blacklisted.

Two points in favor of appointing Gentex Cleaning Services are:

1. Gentex offers specialized expertise in cleaning services, ensuring a higher standard of cleanliness, which can enhance the business's image.
2. Cost-effectiveness through bundled cleaning contracts can lead to savings compared to hiring individual cleaners.