QUESTION 1 [25 MARKS] Boatle Pty (Ltd) is a newly incorporated company that trades in high end uniquely tailored furniture. Customers are given credit on 180 day credit term. There are no proper controls within the organisation as a result there are high default rates by debtors not paying on time, the chief accountant is also having trouble keeping track of customers accounts balances as well as the stock going in and out of the organization. Required:

a. Discuss the controls that can be implemented

i. To resolve the high default rates of debtors. (10 marks)

ii. To help keep track of goods dispatched to customers. (10 marks) b. Briefly explain the limits of the internal controls mentioned above. (5 marks)

QUESTION 2 [25 MARKS]

Hi-Tech company sells equipment with a refund policy, if the customer is not satisfied, that equipment may be returned for a full refund. Sales for the year come to P1,050,000. Required: For each of the following scenarios, explain whether a pure liability, provision or contingent liability should be reported or disclosed at year-end, or whether the refund policy should be ignored.

a. At year end, it is reliably estimated, based on past experience that only 5% of sales will still be returned for a full refund. (13 marks)

b. At year end, it is not possible to estimate the possible returns and related refunds. (12 marks)