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MODULE 14EXAMINATION PAPERSEXAMINATION PAPER 1QUESTION 1: Bank Reconciliation (45 marks; 25 minutes)1.1Calculate the correct bank balance on 30 September 20.9.(24)Cash ReceiptsJournalCash PaymentsJournalTOTALS b/f56?00049 8002.38452.43002.51 4502.71824205602 4002.82 4002.98502.101?500TOTALS60 74555 962Calculation of bank account balance:(7?615) + 60 745 – 55?962 = (2 832)1.2 Bank Reconciliation Statement on 30 September 20.9(11)Balance as per the bank statement (7 922)Outstanding deposit5 200Correction of overpayment of stop order2 400Outstanding cheques: No. 201 (850)No. 195 (920)No. 198 (740)Balance as per bank account (2 832)Alternate format:Bank Reconciliation Statement on 30 September 20.9DebitCreditBalance as per the bank statement 7 922Outstanding deposit5 200Correction of overpayment of stop order2 400Outstanding cheques: No. 201 850No. 195 920No. 198 740Balance as per bank account2 83210 43210 432Negative marking: -1 for R1 200; -1 for R1 2501.3Which GAAP principle dictates the entry to be made for No. 2.5? Why? Explain briefly.(4)Prudence You need to be realistic. The cheque has been written against the business bank account so they will have to make the necessary entry and then can follow up to get the money back from the individual.1.4The owner has asked for your assistance on how to prevent situations like 2.5 above occurring again in the future. Briefly discuss 3 measures that he can introduce.(6)2 signatures on each cheque.Authorisation must be obtained before a cheque is written out.Division of duties. Any other feasible reason.QUESTION 2: Fixed assets and Asset Disposal(45 marks; 30 minutes)2.1GENERAL LEDGER OF SANI TRADERSNOMINAL ACCOUNTS SECTIONDrASSET DISPOSALNCr20.20.9June30VehiclesGJ260 000June30Acc dep on vehiclesGJ110 500[78?000 + 32?500]Creditors controlGJ130 000Loss on disposal of assetGJ19 500260 000260 000(12)2.2 Tangible assets / Fixed assets (21 marks)Land & buildingsVehiclesEquipmentCarrying value at beginning of year920 000340 00080 000Cost920 000560 000420 000Accumulated depreciation0(220?000)340 000Movements230 00085 000107 200Additions at cost230 000320 000132 000Disposals at carrying value (149?500)0Depreciation0 (85 500) (24?800)Carrying value at end of year1?150 000425 000187 200Cost1?150 000620 000552 000Accumulated depreciation0 (195 000)(364?800)CALCULATION OF DEPRECIATIONVEHICLE SOLD: 260?000 x 15% x 10/12 = R32 500Balance of vehicles:560?000 – 260?000 = 300?000 x 15% = R45?000320?000 x 15% x 2/12 = R8 000EQUIPMENT:80?000 x 20% = 16 000132?000 x 20% x 4/12 = 8 8002.3.1The owner is very unhappy about the price that the Outlander was sold for. Suggest 3 possible reasons why the business could not sell the vehicle for a higher price.(6)Bad condition.High mileage.Economic climate – people are not buying expensive cars.Any other feasible reason.2.3.2Briefly discuss 3 measures that the business could introduce to try to avoid such losses in the future.(6)Control private mileage.Keep up the services and maintenance.Trade in earlier before losses are incurred.Any other feasible reason.QUESTION 3: Partnerships(90 marks; 50 minutes)Name of business: S AND M SPORT SHOPINCOME STATEMENT FOR YEAR ENDED 31 OCTOBER 20.9(38 marks)NoteSales4?000 000Cost of sales2?500 000Gross profit1?500 000Other operating income110 830Rent income [65?800 – 9 400]56 400Bad debts recovered2 300Fee income [52?000 – 450]51 550Discount received [470 – 90]380Provision for bad debts adjustment [1?400 – 1?200]200Gross operating income1?610 830Operating expenses1?017 630Salaries and wages [360?000 + 8 000]368 000Salary contributions [36?000 + 80]36 080Insurance [17?280 – 1 500]15 780Discount allowed 1 800Bad debts 4 560Consumable stores [8?200 – 600]7 600Sundry expenses *103 110Water and electricity [12?400 + 1 300]13 700Trading stock deficit2 000Depreciation45 000Rent420 000Operating profit / loss593 200Interest income [1?900 + 500]2 400Profit / loss before interest expense/financing cost595 600Interest expense/financing cost (75?600)Net profit / loss for the year520 000*Balancing figureNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 OCTOBER 20.93.2.1INVENTORIESTrading stock [84 000 - 800 - 2 000]81 200Consumable stores on hand [8?200 – 7?600]6003.2.2TRADE AND OTHER RECEIVABLESNet trade debtors29 100Trade debtors [28?000 + 2 300]30 300Provision for bad debts [1 400 – 200](1 200)Income receivable / accrued500Expenses prepaid 1 500(11)3.2.3CAPITAL ACCOUNTSStuartMarkTotalBalance at the beginning of the year480 000600 0001?080 000Contribution of capital during the year80 000Withdrawal of capital during the yearBalance at the end of the year560 000600 0001?160 0003.2.4CURRENT ACCOUNTSStuartMarkTotalProfit per Income Statement314 800205 200520 000Partners’ salaries216 000108 000Interest on capital[1]40 00048 000Bonus-10 000Primary distribution of profits256 000166 000422 000Final distribution of profits58 80039 20098 000Drawings during the year[2](25?800)(154?344)Retained income for the year289 00050 856Retained income at beginning of year22 000(16?000)6 000Retained income at end of year311 00034 856345 856[1]Stuart: 28 800 + 11 200[2]25 000 + 800(18)3.2.5TRADE AND OTHER PAYABLESTrade creditors [54?000 + 4 890]58 890Deferred income/Income received in advance [9 400 + 450]9 850Expenses payable/Accrued expenses 1 300UIF [230 + 80 + 80]390SARS (PAYE) [2?400 + 1?680]4 080Creditors for salaries6 240Current portion of loan92 000(14)3.3Answer the following questions:3.3.1Calculate the return earned on the average owners’ equity of the partnership. (5)Average equity = (1 080 000 + 1 160 000 + 6 000 + 345 856) ÷ 2 = 1 295 928520?000 x1001?295?928 140%3.3.2Stuart and Mark are not happy with this return as they budgeted to make a return of 50% this year. Explain to them why in view of the economic climate they should be happy with this return.(5)Recession and poor economic conditions may have resulted in the decrease. Also it should be noted that the sporting industry is not an essential item. The return of 40% is a lot higher than they would receive on an alternative investment. QUESTION 4: Ratio and Analysis (45 marks; 30 minutes)4.1Calculate the current ratio for 20.9(3)169 000 : 65?0002.6 : 14.2The acid test ratio for 20.9 is 1.4 : 1. Calculate the missing cash and cash equivalent and inventory figures.(6)65?000 x 1.4 = R91 000CASH AND CASH EQUIVALENTS: 91?000 – 72?000 = R19 000INVENTORY: 169?000 – 91?000 = R78 0004.3Calculate the average stock holding period for 20.9.(4)(78?000 + 110?000) ÷ 2 x 12 423?00094?000 x 12423?0002.7 months / 81 days4.4Calculate the average debtors’ collection period for 20.9.(4)(72?000 + 60?000) ÷ 2 x 12 761?400 x 70%66?000 x 12532 9801.5 months / 45 days4.5Calculate the average creditors’ payment period for 20.9.(4)(65?000 + 52?000) x 12423?000 x 90%58?500 x 12380?7001.8 months / 56 days4.6The owner is very happy as he believes the liquidity position of the business has improved as the current ratio has decreased from last year. You do not totally agree with him. Explain why you feel this way, by quoting at least 2 figures to support your answer.(6)The stock holding period has increased from 1.9 months to 2.7 months.The creditors are been paid quicker than last year (1.8 months as against 2.1 months).The debtors are taking longer to pay, i.e. 1.5 months as against 1.2 months.Therefore, creditors are been paid before the stock has been sold and the debtors have all paid.4.7Calculate the owner’s equity for 20.9.(5)1?200?000 + 240?000 + 169?000 – 500?000 – 65?000 = R1?044?0004.8Is the business solvent? Quote figures to explain.(2)Yes – the owner’s equity is positive ORAssets exceed liabilities 4.9Calculate the debt : equity ratio for 20.9.(3)500?000 : 1 044 0000.5 : 14.10Explain to the owner whether the taking out of the loan was the best option or not. Quote figures to explain your answer. (8)The risk has increased from 0.2 : 1 to 0.5 : 1 although there is still low risk.The return on total capital employed has decreased from 19% to 17%. While there is still positive gearing, the reason for the decrease needs to be assessed – is it going to increase in the future?Overall opinion – partner or loan QUESTION 5: Manufacturing (30 marks; 15 minutes)GENERAL LEDGER OF RAINBOW TOYSBALANCE SHEET ACCOUNTS SECTIONDrRAW MATERIALS STOCKBCr20.820.9 Nov1Balanceb/d23 000Oct31Creditors control88020.9Work-in-progress137 592Oct31Creditors control / purchases105 600Balanceb/d6 800Carriage6 200Import duties10 472145 272145 272Nov1Balance6 800(12)FINISHED GOODS STOCKB20.820.9Nov1Balanceb/d56 000Oct31Cost of sales450 00020.9Balancec/d24 000Oct31Work-in-progress stock418 000474 000474 000Nov1Balanceb/d24 000(5)DrWORK-IN-PROGRESS STOCKB Cr20.820.9Nov1Balanceb/d6 000Oct31Finished goods 418 00020.9Balance c/d16 392Oct31Direct materials cost137 592Direct labour cost100 800Factory overhead cost190 000434 392434 392Nov1Balanceb/d16 392(7)5.2Point out at least 3 reasons why it would be better to buy the raw materials from Limpopo.(6)Buying locally means more employment for locals which could lead to an improvement in the living conditions of our own people.Due to fluctuating exchange rates the imported products are not stable.Goods brought from China are subject to import duties and higher carriage.Ethical reasons around child labour in China.Any other feasible reason.QUESTION 6: Budgets(45 marks; 30 minutes)CASH BUDGET OF JOYCE STORES FOR THE 3 MONTHS ENDED 31 DECEMBER 20.96.1.1 DEBTORS COLLECTION SCHEDULEMONTHCREDIT SALESOCTOBERNOVEMBERDECEMBERAugust180 00054?00027 000September210 00099 75063 00031 500October330 000156 75099 000November420 000199 500153 750246 750330 000(5)6.1.2 CASH BUDGET OF JOYCE STORES FOR THE 3 MONTHS ENDED 31 DECEMBER 20.9RECEIPTSOCTOBERNOVEMBERDECEMBERCash sales220 000280 000360 000Cash from debtors153 750246 750330 000Loan420 000TOTAL RECEIPTS373 750946 750690 000PAYMENTSCash purchases55 00070 00090 000Payments to creditors140 000160 000220 000Interest on the loan3 6007 8007 800Salaries for the shop assistants50 00050 00054 000Manager’s salary20 00020 00023 000Rent5 2005 5905 590Telephone4 0004 0004 000Sundry expenses11 00011 00011 000TOTAL PAYMENTS288 800328 390415 390Surplus (Deficit)84 950618 360Opening bank balance (120?000) (35?050)Closing bank balance(35?050)583 310(28)6.2 Problem solving (12 marks)BRANCHPROBLEM2 mark for identificationPOSSIBLE SOLUTION2 marks for possible solutionKeurboom18 bikes have gone missing.Sales have not met the budget.Need to introduce better control mechanisms to prevent theft of bikes.Need to advertise more.Hot SpringsBought 20 more bikes than what was budgeted for.Sales are too low.Holding too much stock.Need to control buying so that it is line with the budget.Need to advertise more or reduce the selling price in order to increase the stock.Need to buy stock only when it is needed.Valley RiseBudget is too low.No stocks on hand.Over-spent on advertising.Need to review the budgeting.Need to ensure that there is stock available.Advertising has resulted in all the stock been sold. Assess whether all this advertising is necessary or increase stocks and sales.EXAMINATION PAPER 2QUESTION 1: Ledger entries & Accounting equation(30 marks; 18 minutes)Account debitedAccount creditedAmountAOLe.g.EquipmentCreditors controlR20 000+0+1.1Bank Capital: Ben R120 000+ + 0Vehicle R150 0001.2Capital: Ben Loan from Ben R200 0000–+ Current acc: Ben R100 0001.3Drawings: Ben Trading stock R11?200 – –01.4Salary: Dudu Current a/c: DuduR480?000 0+ –0Bonus: Dudu R50 0001.5Appropriation Current a/c: BenR240?000 0± 0Current a/c: DuduR80?000 (8)(7)(5)(10)QUESTION 2: Creditors Reconciliation & Internal Control (35 marks; 21 minutes)2.1Explain the following:What is meant by ‘internal control’ and ‘division of duties’ in an Accounting department of a business?(4)‘Internal control’ The systems put in place to safeguard the resources and assets of a business. ‘Division of duties’The careful allocation of Tasks to people in the Accounting Department so that the work of one person serves as a check on another.Three points you would mention to Miss Nevva Wright concerning the comments she has made (see above).(6)Any three valid points Creditors’ reconciliations are an important part of internal control.They are not a waste of time but are essential to ensure that creditors are paid the correct amounts.This process is part of her job description as a bookkeeper. Her existing salary covers this.Statements received from creditors are documents received from other organisations.2.2Make a list of the changes to BB Wholesalers’ account in the Creditors Ledger which Miss Nevva Wright should process to correct her errors or omissions. Show the changes to the balance of BB Wholesalers in the Amount column.(12)Description of correctionAmountDiscount received reversed+680Interest expense to be entered+658Correction of DN 102-114Correction of JV 82-4 000Correction of adding error on 23 Oct-18 000Entry of discount on 23 Oct-1 000Workings: New balance on BB Wholesalers’ account: 57?000 – 21?776 = 35 2242.3Prepare a Creditor’s Reconciliation Statement in respect of BB Wholesalers for October 20.8(13)Balance per statement received from BB Wholesalers9 842Reduction of interest charged-500Correction of C/N 1009+3 000Correction of Inv 5943-198Transfer of balance JV82-2 000Invoice 6021 omitted+25 080Correct balance35 224QUESTION 3: Balance Sheet & Fixed assets(80 marks; 48 minutes)VUZAN TRADERSBALANCE SHEET / STATEMENT OF FINANCIAL POSITION ON 28 FEBRUARY 20.8 (33 marks)ASSETSNoteRNon-current assets3?205 200Fixed assets12?985 200Investment: Fixed deposits [300?000 – 80?000]220 000Current assets793 000Inventories [565 200 – 12?000 – 7?000 + 8?000]554 200Trade & other receivables [103?000 – 13?000 – 7?200 + 11 000]93 800Cash & cash equivalents [60?000 + 5?000 + 80?000]145 000TOTAL ASSETS 3?998 200EQUITY & LIABILITIESPartners’ equity 3?309 000Capital [1 500 000 + 900?000]2?400 000Current accounts2 909 000Non-current liabilities310 500Loan from Prime Lenders [344?000 + 62?500 – 96 000]310 500Current liabilities378 700Trade & other payables3356 900Bank overdraft [35?000 + 800 – 14?000]21 800TOTAL EQUITY & LIABILITIES3?998 200Note 1: FIXED ASSETS (16 marks)Land & buildingsEquipmentTotalCarrying value at beginning2?520?000540?0003?060 000Cost 2?520 000900?0003?420 000Accumulated depreciation(360?000)(360?000)Movements75 000[149?800][74 800]Additions at cost 75 000 36?000111 000Disposals at carrying value (5?500)(5?500)Depreciation* (180 300)(180 300)Carrying value at end 2?595 000 390?2002?985 200Cost 2?595 000 909?0003?504 000Accumulated depreciation (518?800)(518?800)*[27 000 x 20% x 10/12] + [900 000 – 27 000 x 20%] + [36 000 x 20% x 2/12]Note 2: CURRENT ACCOUNTS (13 marks)8.CURRENT ACCOUNTSVuziAndrewTotalProfit per Income Statement620?000 680?0001?300 000Partners’ salaries360 000360 000720 000Interest on capital [60?000 + 5?000]150 000 65?000215 000Bonus 200?000200 000Primary distribution 510 000 625?0001 135 000Share of remaining profit110 000 55?000165 000Drawings [220?000 + 12?000](240?000) (232?000)(472?000)Retained income for the year380 000 448?000828 000Balance at beginning of year(44?000) 125?00081 000Balance at end of year336 000 573?000909 000Note 3: TRADE & OTHER PAYABLES (18 marks)9.TRADE AND OTHER PAYABLESTrade creditors [181?000 + 14?000 + 36?000 – 5 500]225 500Deferred income (received in advance)9 200SARS (PAYE) [9?130 + 1?970]11 100Golden Age Pension Fund [7?080 + 630 + 990]8 700Creditors for salaries6 400Current portion of loan96 000356 900QUESTION 4: Interpretation of financial information(50 marks; 30 minutes)4.1Comment on the solvency of the business. Should the partners be satisfied? Explain. Quote a financial indicator (actual figures or percentages) for both years to support your answer.(4)Opinion: YesComment: The business should have no problem in settling all its debts.Total assets are 4 times higher than total liabilities (increased from 3 times in the previous year). 4.2Should the partners be satisfied with the stock turnover rate? Explain, quoting the financial indicator (actual figures) for both years to support your answer.(4)Opinion: YesComment: The business is selling its stock more quickly in 20.8. The stock turnover rate has improved from 5 times to 7 times in 20.8. 4.3Comment on the liquidity of the business. Quote two financial indicators (actual figures or percentages, other than those used above) for both years to support your answer.(6)Both the current ratio and the acid-test ratio have remained constant at 1.8 : 1 and 0.8 : 1 respectively.Liquid assets are approximately equal to current liabilities, so the business should be able to settle its current debts, especially as these ratios have existed for the past two years without any apparent problems.The ratios are not too high indicating that the working capital is being used efficiently. 4.4In your opinion, has the business appeared to control its operating expenses well in 20.8? Quote two financial indicators (actual figures or percentages) for both years to support your answer.(3)Opinion: No Comment: Operating expenses on sales increased from 33.5% to 40.1% 4.5Explain what accounts for the difference between the percentage operating expenses on sales and the % net profit on sales.(2)In both years the interest expense exceeded the interest income. 4.6The percentage return earned by the business on average equity is 23.0%. Provide a calculation to prove that this calculation is in fact correct.(5)885?000 x 100 = 23.0%3?845?000 14.7The percentage return earned by Ted on his average equity is 19.0%. Provide a calculation to prove that this calculation is in fact correct.(5) 345?000 x 100 = 19.0%1?815?000 14.8Comment on the percentage return earned by the business. Quote a financial indicator (actual figures or percentages) for both years to support your answer.(4)The partners should be satisfied as the return of 23.0% in 20.8 exceeds that which can be earned on alternative investments. However, this has decreased from 27.3% in 20.7 so the partners should develop strategies or implement controls to get the return back to previous levels.4.9Comment on the percentage return earned by Ted. Quote a financial indicator (actual figures or percentages) for both years to support your answer.(4)Ted should not be completely satisfied as his return (19.0%) has decreased (from 24.9%) and is lower than that of the business (23.0%)and Bess (27.6%).He should look at possibly renegotiating with Bess for a fairer distribution of profit. 4.10Comment on the debt / equity ratio. Quote a financial indicator (actual figures or percentages) for both years to support your answer.(4)The debt/equity ratio has increased from 0.5 : 1 to 0.6 : 1 This indicates that the business is making relatively more use of loans and is in a more risky situation should profits drop in future. 4.11What percentage of the net income are the partners withdrawing from the business? Is this good business practice? Explain, quoting figures to support your opinion. (4)Percentage withdrawn:295?000 x 100= 33.3%885?000 1Comment:This is good business practice as the partners are now retaining a lot more in the business thereby enabling it to grow and earn bigger profits in the future.4.12You are told that R200 000 has been spent in the past year for the controlled destroying stock of detergents, cleaning materials and chemicals that have reached their sell-by date. Partner Bess thinks this has been a waste of money, while Ted disagrees. Which opinion do you share? Explain. (5)Share Ted’s opinion.This is a responsible business practice.The business must display respect for the environment.Disposing of these materials in unsafe ways will lead to consequences for the environment and the local community.Others will have to bear a cost of rectifying the problem which is unfair.The business must display good corporate governance in this regard as their products are dangerous and due care should be taken. QUESTION 5: Manufacturing(35 marks; 21 minutes)5.1Calculate the following for the year:Direct materials cost(3)3 090 x 3 = 9 270 x R130 = R1?205 100Direct labour cost(5)Normal time: 30 x R35 x 240 days x 9 hours =R2?268 000 Overtime: 4 000 hours x R52 =R 208?000 =R2?476?000 5.2 DrWORK-IN-PROCESS STOCK ACCOUNTBCr20.720.8Mar1Balanceb/d510 000Feb28Finished goods stock5?531 10020.8(3 090 x R1?790)Feb28Direct materials cost1?205 100Balancec/d320 000Direct labour cost2?476 000Factory overhead cost*1?660 0005?851 1005?851 10020.8Mar1Balanceb/d320 000(13)*Balancing figure.5.3Calculate the net profit for the year.(6)Sales (3 060 jackets at R2?600 each)R7?956 000Cost of sales (75?000 + 5?531?100 - 143?200)(5?462?900)Gross profit2?493 100Administration cost(780?000)Selling & distribution cost(822?000)Net profit891 1005.4Jackie is concerned about the increase in the cost of producing the jackets as this is negatively affecting the net profit he is earning. He is considering an alternative fabric costing R110 per metre which looks the same as the fabric currently used, but is not as long-lasting. Explain four points that you would mention to Jackie, quoting evidence or figures from the question to support your answer.(8)Any four valid points. Award part-marks for less complete answers.It would be foolish to focus on the fabric as the cause of the problem as the price has remained constant at R130 per metre for the past two years.The unit cost of production increased from R1?500 to R1?790 per jacket due to the other costs of production, i.e. labour or overheads. Rather focus on those for cost savings, e.g. reduce the amount of overtime, or do a study of the efficiency of the workers.The increase in unit cost is significantly affected by the number of units produced. The number of units produced dropped from 4?000 to 3?090. Fixed costs remain constant (i.e. administration cost and factory overheads), which means that fixed costs per unit have increased. Rather try to increase production over 4?000 units again, and market the jackets and price the jackets correctly. Ethically, it would be wrong to mislead the customers about the quality of the fabric. They will notice this sooner or later and this will affect the sales that they make, as well as the goodwill that they have built up with their client base.QUESTION 6: Budgeting(30 marks; 18 minutes)6.1Consider the budget for staff training and advertising:Calculate the percentage increase in staff training from January to February 20.9.(2)6?000 x 100 = 15%40?000Explain how Simon budgets for advertising (calculate the actual percentage used in his method).(2)10 800 x 100 = 3% 360?000OR 6?000/200?000 x 100 OR 3600/120?000 x 100 Do you agree with Simon’s budgeting for both these items? Explain.(4)It is good that he is investing a significant amount (R40?000 and R46?000) in training as this will benefit the business in terms of its professional dealing with customers. His sales appear to be very seasonal, e.g. lower sales in January (R200?000) and even lower sales in February (R120?000). Applying a small percentage such as 3% might not be advisable. In the months with low sales he should consider advertising a lot more to try to keep his sales constant in order to cover monthly overheads.6.2Calculate the missing figures in the Cash Budget designated by A to F.(16)Calculation of A (Cash sales for February 20.9):25% x R120?000 = R30?000 Calculation of B (Collection from debtors for February 20.9):(90?000 x 30% x 94%) + (150?000 x 55%) + (10% x 270?000)= 25?380 + 82?500 + 27?000 = R134?880 Calculation of C (Rent income for January 20.9):14?112/112 x 100 = R12?600 Calculation of D (Cash purchases of trading stock for January 20.9):40% x 160?000 = R64?000 Calculation of E (Salary of manager for January 20.9):9?000 x 109/100 = R9?810 Calculation of F (Wages of shop assistants for January 20.9):20?400 x 3/4 x 105/100 = R16?065 6.3The shop assistants are not satisfied with their increase. Explain what advice you would give to Simon. Provide two points. Quote evidence or figures from the question to support your answer.(6)Any two valid points, quoting evidence from the question. The manager got an increase of 9% which is above the inflation rate.The shop assistants got an increase of 5% which is much lower and is calculated off a lower base. The shop assistants will not see this as fair.One of the shop assistants has not been replaced. This means that the other assistants will be doing more work. However, sales are decreasing by R60?000 in January and a further R80?000 in February, so maybe keeping four assistants is not viable. So maybe keeping four assistants is not viable.QUESTION 7: Periodic inventory system(40 marks; 24 minutes)7.1.1Calculate the value of closing stock on hand on 28 February 20.8 (refer to Information 2?(c) below).(6)Taps: R4?000 + R10?500 + (30 x R100):R17?500Other stock:R102?000TOTALR119 5007.1.2 DrTrading accountBCr20.8Feb28Opening stock94 00020.8Feb28Sales1?565 800Purchases(870?000+ 66?400)936 400(1?630?000 – 62?000– 2?200)Customs duty(28?000 + 9?960)37 960Closing stock119 500Carriage (45?000+ 7?000)52 000Profit & loss564 9401?685 3001?685 300(19)7.1.3Calculate the following:Cost of sales(3)1?565?800– 564?940 = R1?000?860OR(94?000 + 936?400 + 37?960 + 52?000) – 119?500 = R1?000?860Mark-up % achieved on cost(3)564?940 x100 = 56.4% 1?000?860 1 QUESTION 7.2COMMENT, IDENTIFY PROBLEM & QUOTE FIGURE/SPROVIDE ADVICE3 marks x 3 shops = 9 marks totalMark allocation on each shop: Comment on problem Figure/s Mark allocation on each shop: Advice NORTHVILLE SHOPManager: NoraCredit sales are Nil / Creditors being paid after 15 days – affects liquidity as the stock takes 60 days to sell.Offer sales on credit to increase sales / Use credit terms to the maximum.WESTVILLE SHOPManager: WallyNo discounts offered (75% mark up achieved at all times) / Debtors taking too long to pay (40 days) which affects liquidity.Offer trade discounts to liquidate slow-moving stock / Chase up slow-paying debtors.SOUTHVILLE SHOPManager: SamThe shop is doing well. Sales are high (R2.24m) / Gross profit is high (R640?000)Stock holding period too low (15 days).Offering discounts appears to be increasing sales – maintain this policy / Increase stock levels to ensure demand can be satisfied. ................
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