QUESTION 2: STOCK EVALUATION AND INTERNAL CONTROL 2.1 EQ TRADERS You are provided with information relating...

 

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QUESTION 2: STOCK EVALUATION AND INTERNAL CONTROL 2.1 EQ TRADERS You are provided with information relating to EQ Traders, (owner E. Quinta), a business who sells power generators for home use. Quinta import these generators from a supplier in Germany. The periodic inventory system is in use and a fixed selling price is maintained throughout the year. He uses the FIFO method of valuating stock. REQUIRED 2.1.1 Explain TWO differences in recording purchases of trading stock between the perpetual stock system and the periodic stock system. 2.1.2 2.1.3 Calculate the cost of sales for the year. Calculate the value of the closing stock using the FIFO method. 2.1.4 The owner is considering changing to the perpetual stock system. Do you agree with his decision? Discuss by explaining ONE advantage and ONE disadvantage of the perpetual stock system in comparison the periodic stock system. 2.1.5 Calculate the stock holding period for the financial year. INFORMATION 1. Balances and Purchases Dates Opening stock (1 March 2020) 36 marks: 22 minutes Purchases during the year 31 March 2018 19 July 2018 20 December 2018 Closing stock (28 February 2020) Number of units 150 280 130 90 60 60 GRADE 12 ACCOUNTING 5. The sales for the year were R3 094 400. Cost 690 000 1404 000 624 000 450 000 330 000 ? 2. The value of the opening stock includes import duty. 3. Import duty for the financial year: • Quinta import the generators in batches of 10. The import duty is R1 000 per batch. 4. 10 generators bought on 20 December 2020 were returned to the supplier. The supplier agreed to refund R55 000 per generator and no other costs. 2022 (4) (7) (5) QUESTION 2: STOCK EVALUATION AND INTERNAL CONTROL 2.1 EQ TRADERS You are provided with information relating to EQ Traders, (owner E. Quinta), a business who sells power generators for home use. Quinta import these generators from a supplier in Germany. The periodic inventory system is in use and a fixed selling price is maintained throughout the year. He uses the FIFO method of valuating stock. REQUIRED 2.1.1 Explain TWO differences in recording purchases of trading stock between the perpetual stock system and the periodic stock system. 2.1.2 2.1.3 Calculate the cost of sales for the year. Calculate the value of the closing stock using the FIFO method. 2.1.4 The owner is considering changing to the perpetual stock system. Do you agree with his decision? Discuss by explaining ONE advantage and ONE disadvantage of the perpetual stock system in comparison the periodic stock system. 2.1.5 Calculate the stock holding period for the financial year. INFORMATION 1. Balances and Purchases Dates Opening stock (1 March 2020) 36 marks: 22 minutes Purchases during the year 31 March 2018 19 July 2018 20 December 2018 Closing stock (28 February 2020) Number of units 150 280 130 90 60 60 GRADE 12 ACCOUNTING 5. The sales for the year were R3 094 400. Cost 690 000 1404 000 624 000 450 000 330 000 ? 2. The value of the opening stock includes import duty. 3. Import duty for the financial year: • Quinta import the generators in batches of 10. The import duty is R1 000 per batch. 4. 10 generators bought on 20 December 2020 were returned to the supplier. The supplier agreed to refund R55 000 per generator and no other costs. 2022 (4) (7) (5)

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