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INVENTORY: MANAGEMENT AND VALUATION (45 marks)

The following transactions were concluded in respect of school bags bought and sold by Swing Traders for 2020. They make use of the weighted average method of stock valuation and the periodic inventory system.

INSTRUCTION:

1. Use the information to determine the following (round off to the closest integer):

1.1. Number of bags supposed to be on hand at the end of the year. (5)

1.2. Value of stock supposed to be on hand at the end of the year. (10)

1.3. The value of the total units stolen. (4)

1.4. Actual cost of sales (7)

1.5. Gross profit (3)

1.6. Percentage gross profit on cost of sales. (In 2019 it was 80% on cost price). Give ONE reason for the difference. (5)

2.Answer the following questions:

2.1.After an investigation was done, the owner discovered that one of the employees stole school bags and sold them to a small retailer. What disciplinary and punitive action can be taken against the staff member? Name TWO. (4)

2.2. Should the firm employ internal and external auditors? Explain. (3)

2.3. Give TWO practical suggestions to improve the internal control systems to prevent theft from happening. (4)

INFORMATION:

Details	Date	Quantity	Price
On hand	January 2020	135	R150 each
Purchased	January 2020	100	R150 each
	March 2020	100	R165 each
	August 2020	120	R170 each
	November 2020	185	R175 each
Returned	March 2020	25	?
Carriage on purchases			R4 500
Total items sold		465	R300 each
Stock supposed to be on hand		?
Debtor allowances			R2 900
Stock on hand according to physical stock taking		141

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