QUESTION $1(31$ marks$)$

EAD $($Pty$)$ Ltd is a company that manufactures heavy$-$duty, high$-$quality printers used

by printing companies. EAD $($Pty$)$ Ltd has a $30$ June year$-$end.

EAD $($Pty$)$ Ltd makes use of a perpetual inventory recording system and the first$-$infirst$-$out $($FIFO$)$ costing formula to account for their inventory items.

CDC$500$ Printer

The control panel used in the CDC$500$ printer is imported from China, but due to a

supply shortage, EAD $($Pty$)$ Ltd had to make use of a local supplier to source $40$ control

panels required for the manufacturing of CDC$500$ printers during May $2024$ and June

$2024.$

The selling price of the CDC$500$ printer was fixed at R$460000$ each for the period

January $2024$ to July $2024$ and EAD $($Pty$)$ Ltd spent an average of R$2000$ per CDC$500$

printer to transport it to a customer. The total manufacturing cost per CDC$500$ printer

is R$400000.$

By $30$ June $2024,$ all $40$ control panels had been used in the CDC$500$ printer

manufacturing process. $25$ of the CDC$500$ printers featuring the control panel from the

local supplier had been sold, and the rest were all included in finished goods. No

CDC$500$ printer featuring the control panel from the local supplier was incomplete and

included in the work$-$in$-$progress on $30$ June $2024.$

During July $2024,$ many of the CDC$500$ printers sold between May $2024$ to July $2024$

were returned due to the control panel malfunctioning. The customers complained that

the control panel became unresponsive, leading them to not be able to use the printer

as they were not able to select the required function on the control panel.

Due to multiple complaints received, EAD $($Pty$)$ Ltd decided to cancel the use of the

control panel from the local supplier and replace the control panel on the CDC$500$

printer models that are not yet sold.

$3$ HFAC$231-1-$Jan$-$Jun$2024-$SA$1-$CP$-$V$2-08122023$

The costs to replace the control panels were as follows:

$$ Material of R$60000$ per CDC$500$ printer.

$$ Labour of R$7000$ per CDC$500$ printer.

Printer toner

The following information relates to EAD $($Pty$)$ Ltd$$s printer toner manufacturing

process for the month of June $2024$:

Balances on $1$ June $2024$:

Units Value

Raw materials $1200$ kg R$15000$

Work$-$in$-$progress R$30000$

Finished goods R$112500$

Raw materials:

$2000$ kg was purchased during the month of June $2024,$ amounting to R$30000.$

$1800$ kg were used in production during the month of June $2024.$

Wages:

$$ Wage expenses incurred during June $2024$ amounted to a total of R$550000.$

$$ The wage expense was incurred as follows:

Factory employees $$ printer manufacturing $75\%$

Factory employees $$ toner manufacturing $10\%$

Cleaning staff in the factory $4\%$

Cleaning staff in the head office $4\%$

Administration staff in the head office $7\%$

Other conversion costs:

$$ The factory$$s water and electricity expenses for June $2024$ amounted to R$52500$

and were paid for in cash. EAD $($Pty$)$ Ltd classifies water and electricity expenses

as variable costs, which are allocated based on the surface used by each

manufacturing process. EAD $($Pty$)$ Ltd$$s factory surface is used $20\%$ for the toner

manufacturing process and $80\%$ for the printer manufacturing process.

$4$ HFAC$231-1-$Jan$-$Jun$2024-$SA$1-$CP$-$V$2-08122023$

$$ Depreciation, which is also classified as a variable cost, amounted to R$250000.$

$-70\%$ of the depreciation relates to the machinery used in the printer

manufacturing process.

$-20\%$ of the depreciation relates to machinery used in the toner

manufacturing process.

$-10\%$ of the depreciation relates to equipment used in the head office.

$$ The June $2024$ rental of the factory building amounted to R$100000$ and was paid

for in cash. Fixed manufacturing costs are allocated based on labour hours and

normal capacity labour hours amount to $200$ hours per month. Due to some idle

time, the EAD $($Pty$)$ Ltd factory staff worked a total of $190$ hours during June $2024.$

$40$ of the $190$ hours related to the toner manufacturing process.

Work$-$in$-$progress:

$$ The work$-$in$-$progress balance as at $30$ June $2024$ is estimated to be $25\%$ of all

costs introduced into work$-$in$-$progress during the month of June $2024.$

$$ All other costs were transferred to finished goods.

Finished goods:

$$ Cost of sales transferred from finished goods for the June $2024$ toner sales was

correctly calculated as R$205000.$

$5$ HFAC$231-1-$Jan$-$Jun$2024-$SA$1-$CP$-$V$2-08122023$

REQUIRED:

$1\mathrm{.}1)$ With reference to the information under CDC$500$ Printer, prepare the general

journal entries EAD $($Pty$)$ Ltd should process in its accounting records for the

$30$ June $2024$ financial year end relating to the malfunctioning of the locally

sourced control panels.

$$ Journal dates and narrations are not required.

$$ Ignore any tax implications.

$$ Round all answers to the nearest Rand.

$(12$ marks$)$

$1\mathrm{.}2)$ With reference to the information under Printer toner, calculate and present

the printer toner inventory balances in the Notes to the financial statements of

EAD $($Pty$)$ Ltd for the year ended $30$ June $2024.$ Comparativ