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The financial year-end of Carpets Galore (Pty) Ltd is 31 October 2019 - NSC Accounting - Question 6 - 2019 - Paper 1
Question 6
The financial year-end of Carpets Galore (Pty) Ltd is 31 October 2019. Thembi Tsomi is the sole shareholder and director. 6.1 Indicate amounts in the appropriate bl... show full transcript
Worked Solution & Example Answer:The financial year-end of Carpets Galore (Pty) Ltd is 31 October 2019 - NSC Accounting - Question 6 - 2019 - Paper 1
Step 1
Indicate amounts in the appropriate blocks for the Cash Budget and Projected Income Statement for three months ending 31 January 2020
Answer
For the Cash Budget:
- Printer Purchase: The cash outflow for the printer on 30 November 2019 is R40 800.
- Depreciation Expense: Monthly depreciation of R680 will be recorded.
- Insurance Payment: On 1 January 2020, R48,000 will be paid for the insurance contract which covers 12 months.
- Loan Received: A loan of R100,000 will be received on 31 December 2019.
- Interest Expense: Calculate the monthly interest at 12% per annum on the outstanding loan amount, which will start from January 2020.
For the Projected Income Statement:
- Depreciation: Total depreciation expense will accumulate to R680 for each month.
- Insurance Expense: An amount of R4,000 will be shown as an insurance expense in the income statement for the 12-month period.
Step 2
Calculate the % of debtors who settle their accounts in the 2nd month following the credit sales transaction month
Answer
To find the % of debtors who settle their accounts in the 2nd month:
- Use the formula:
- Assuming that 67,500, 75,000, or 90,000 debtors might pay, we take the total for calculations.
For instance, if 67,500 out of 90,000 settle in the 2nd month:
Step 3
Step 4
Explain what she should say to them regarding the increase on 1 October 2019
Answer
Thembi can communicate two key points:
- Explanation of Increase: Explain that there was a general increase of 20% in salaries due to rising inflation and to adjust for the increased cost of living.
- Budget Constraints: Mention that the company had set a budget cap for salaries, which had to be strictly adhered to, hence the increase provided might be less than expected in light of overall company performance.
Step 5
Comment on projected sales in October / September
Answer
In October, projected sales were aimed at R110,000 based on the previous month's performance. However, a drop in demand in September indicated sales of only R380,000 compared to budgeted R490,000. Thereby, the expected outcome in October was reduced, and adjustments for over-budgeting were necessary.
Step 6
Provide figures to illustrate the impact on sales in September
Answer
In September, sales were reported at R380,000 against a budgeted R490,000, indicating a shortfall of R110,000, translating into a 22% drop in expected sales. This was largely due to the competition that entered the market.
Step 7
Explain three actions that Them bi took in October in response to the new competitor
Answer
In response to the competition, Them bi took the following actions:
- Promotional Sales: Offered credit sales reduced from R296,000, which helped maintain consumer engagement despite increasing competition.
- Adjustment in Pricing: Dropped the selling price from R100 to R88 per square meter to stay competitive.
- Increased Staffing and Training: Allocated R40,000 for training staff which will enhance service delivery and potentially increase sales in the future.