Minutemin Limited, a client of yours, sells photocopiers and provides photocopying services. The manufacturer supplies inventory to
Question:
Minutemin Limited, a client of yours, sells photocopiers and provides photocopying services. The manufacturer supplies inventory to Minutemin on the following terms and conditions:
• Minutemin pays the manufacturer a deposit if R3 000 per photocopier upon delivery.
• The machines have a total cost of R30 000.
• The photocopiers are displayed on Minutemin’s premises and used as demonstrationcmodels until sold.
• When an item is sold, the balance of the purchase price, which is determined when the deposit is paid, is paid to the manufacturer.
• Minutemin pays for the insurance of the items while it’s on the premises.
• If the items are not sold after 3 months, they can be returned to the manufacturer. This situation has never taken place as the company keeps only one month’s inventory on hand at any one time.
Required:
1. Discuss the recognition of the photocopiers in the financial statements of Minuteman Limited with reference to the Conceptual Framework.
2. Explain the benefits that arise from having a conceptual framework.
Fundamentals of Investments
ISBN: 978-0132926171
3rd edition
Authors: Gordon J. Alexander, William F. Sharpe, Jeffery V. Bailey