Minutemin Limited, a client of yours, sells photocopiers and provides photocopying services. The manufacturer supplies inventory to

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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.