INSTRUCTIONS AND INFORMATION
Read the following instructions carefully and follow them precisely.

1. Answer ALL the questions.
2. A special ANSWER BOOK is provided in which to answer ALL the questions.
3. A FORMULA SHEET for financial indicators is attached to this question paper. You may use it if necessary.
4. Show ALL workings to earn part-marks.
5. You may use a non-programmable calculator.
6. You may use a dark pencil or blue/black ink to answer the questions.
7. Where applicable, show all calculations to ONE decimal point.
8. Write neatly and legibly.
9. Use the information in the table below as a guide when answering the question paper. Try NOT to deviate from it.

QUESTION 1: CREDITORS’ RECONCILIATION AND MANAGEMENT OF CASH
(30 marks; 20 minutes)

1.1 CREDITORS’ RECONCILIATION
The inexperienced bookkeeper of Lavender Traders completed the creditors’ ledger account for Fragrance Suppliers, a major creditor of the business. The balance does not correspond with the outstanding balance according to the statement received from Fragrance Suppliers.

REQUIRED:
1.1.1 Refer to Information A, B and C

Complete the table in the ANSWER BOOK to reconcile the balance in the creditors ledger to the balance reflected on the statement. Show a “+” for increases and a “–” for decreases, next to each amount. (13)

1.1.2 Refer to Information D

Calculate the average creditors’ payment period (in days). (5)

1.1.3 Provide TWO internal control measures which can be implemented to ensure better management over creditors (4)

INFORMATION:
A. Creditors’ ledger of Lavender Traders:

B. Statement received from Fragrance Suppliers:

C. Additional information:

1. Fragrance Suppliers neglected to deduct 5% trade discount on Invoice 532.
2. Debit note 57 was treated incorrectly by Fragrance Suppliers.
3. Fragrance Suppliers granted Lavender Traders 10% discount on the payment on 14 June 2022, because the payment was made before the 15th of the month.
4. Lavender Traders entered Invoice 575 incorrectly.
5. Invoice 2997 was for purchases from Frequent Stores and not from Fragrance Suppliers.
6. Lavender Traders neglected to enter Invoice 678.
7. Fragrance Suppliers closes their entries on the 25th of every month.

D. Information on 30 June 2022 (year-end):

1.2 MANAGEMENT OF CASH

You are provided with information from the records of Eden Nurseries.

1.2.1 The bookkeeper presented the owner with a Bank Reconciliation Statement on 31 May 2022 and two large outstanding deposits were noticed. On further investigation of the receipt books, it appeared that these funds were received by the manager as follows:

•  15 May 2022 R62 500
• 20 May 2022 R50 600
  Provide TWO concerns the owner should have regarding these deposits. (4)

1.2.2 Provide TWO suggestions that can be used to ensure that this does not happen again. (4)
30

QUESTION 2: COST ACCOUNTING (50 marks; 40 minutes)

2.1 STUTTERHEIM MANUFACTURERS
You are provided with information from the records of Stutterheim Manufacturers for the financial year ended 30 April 2022. They manufacture coffee tables.

REQUIRED:

2.1.1 Prepare the Production Cost Statement for the year ended 30 April 2022. (17)
2.1.2 Complete the abridged Statement of Comprehensive Income (Income Statement) for the year ended 30 April 2022. (10)

INFORMATION:

A.

B. Extract from the records on 30 April 2022 (before additional information below):

C. Additional information to be taken into account:

1. The entire insurance expense of R68 250 was entered in administration cost in error. 60% of this expense should have been allocated to the factory overhead cost.
2. Factory overhead cost includes the total amount for rent paid for the financial year, R108 900. Rent expense should have been allocated according to floor area occupied, as follows:
   Factory 400 m²; Shop 80 m²; Office 120 m²

D. Production:
Stutterheim Manufacturers produced 39 000 units at a cost of R135 each.

2.2 UNIT COST AND BREAK-EVEN
Lexus Manufacturers produces pencil cases.

REQUIRED:
2.2.1 Explain the difference between fixed cost and variable cost. (2)
2.2.2 Calculate the break-even point for 2022. (5)
2.2.3 Comment on the break-even point and the level of production for 2021 and 2022. Quote figures. (6)
2.2.4 Identify the variable cost which the owner should be concerned about. Explain and provide a calculation to support your answer. (4)
2.2.5 Even though there was a decrease in the fixed costs per unit, the owner is still not satisfied with the control over fixed costs. Explain why he feels this way and provide calculations to support his concern. (4)
2.2.6 Give ONE possible reason for the decrease in selling and distribution cost. (2)

INFORMATION:

A.

B. Additional information:
Assume an inflation rate of 6% for the current financial year.

QUESTION 3: INVENTORIES
(35 marks; 30 minutes)
3.1 INVENTORY VALUATION
You are provided with information on Happy Hats. The business sells sun hats. They use the periodic inventory system and the weighted average method to value their stock.
The business is owned by Happiness. Nelson, the manager, is responsible for the day to day running of the business.

REQUIRED:
3.1.1 Calculate the following for the financial year ended 28 February 2022:

• Value of closing stock (10)
•  Gross profit (6)

3.1.2
Happiness discovered that Nelson had stopped buying from their regular supplier of hats in August 2021 without informing him about this change. He also discovered that the new supplier is Nelson’s cousin.
What advice can you offer Happiness in this regard? State TWO points.
(4)
INFORMATION:
A. Stock balances

B. Purchases during the year:

C. Returns for the year: (cost price plus carriage were refunded)

D. Donation:
20 sun hats from the May 2021 batch were donated to a local school who took learners on an educational tour.
E. Sales:
1 986 hats were sold during the financial year at a selling price of R220 each.

3.2 MANAGEMENT OF STOCK (PROBLEM-SOLVING)
In addition to sun hats, Happy Hats also sells sun glasses and beach bags. Information from their stock records on 28 February 2022, is provided.

REQUIRED:
3.2.1 Because of problems with stock theft, Happiness has installed security cameras. Despite this, he thinks that sun hats are still being stolen.

Provide a calculation to verify that sun hats are being stolen. Give TWO points of advice to Happiness to address this problem.
(9)

3.2.2 Happiness is unsure whether he is charging the correct prices for the sun glasses and the beach bags.

Give him advice on EACH product. Quote figures.
(6)

INFORMATION:

.

QUESTION 4: FIXED ASSETS AND INTERNAL AUDIT PROCESSES (35 marks; 30 minutes)

4.1 FIXED ASSETS
You are provided with information from the records of Fezeka Traders Ltd.
The financial year ended on 30 June 2022.

REQUIRED:
4.1.1 Complete the following accounts in the General Ledger.

All accounts must be balanced or closed off on 30 June 2022.
Note that some amounts are provided in the ANSWER BOOK.

• Equipment (7)
• Accumulated depreciation on equipment (12)
•  Asset disposal (7)

INFORMATION:

1. On 31 March 2022 old office furniture was sold for cash at a profit of R2 000. This furniture was bought at a cost of R35 000 on 1 July 2020.
2. On 1 April 2022 new furniture to the value of R192 000 was bought on credit and an EFT was made to pay installation fees of R3 000.
3. Depreciation is calculated at 20% p.a. on carrying value.

4.2 INTERNAL AUDIT PROCESSES
The Board of Directors expressed concern that despite appointing an internal auditor to set up internal control processes, the external audit report indicated that certain business trips of the CEO could not be verified. The external auditors were satisfied with all other evidence provided.

REQUIRED:
4.2.1 Name the type of report that was received. (1)
4.2.2 Explain TWO possible consequences of such a report for the company. (4)
4.2.3 How should the Board of Directors handle this matter? Provide TWO points. (4)

35
TOTAL: 150