QUESTION 2 [22 MARKS 40 MINUTES] Ndalu Exterminators Limited (NEL') is a pesticide manufacturer. Its sales declined greatly in 2022 due to the passage of legislation outlawing the sale of several of NEL's chemical pesticides. This was premised on the fears over the effects of pesticides on the lungs of the elderly. In the coming year (2023), NEL will have environmentally safe and competitive chemicals to replace these discontinued products. Sales in the next year are expected to exceed any prior years greatly. The decline in sales and profits appears to be a 1-year anomaly. But even so, the company's chief executive officer fears a large dip in the current year's profits. He believes such a dip could cause a significant drop in the market price of NEL's ordinary shares and make the company a takeover target, as investors will view the shares as cheap. To avoid this possibility, the company's Chief Executive Officer calls in Ms Liane Leno, the company's Chief Accountant and a South African Institute of Chartered Accountants member, to discuss this period's year-end adjusting and closing journal entries. He urges Liane to accrue every possible revenue and to defer as many expenses as possible. He tells Liane, "We need the revenues this year or this accounting cycle, and next year can easily absorb expenses deferred from this year. We can't let our share price be hammered downwardi" Diane didn't get around to recording the adjusting entries until 17 January 2023, but she dated the entries 31 December 2022 as if they were recorded then. Liane also made every effort to comply with the Chief Executive officer's request. \begin{tabular}{|r|l|c|} \hline & YOU ARE REQUIRED: & MARKS \\ \hline a) & Who are the stakeholders in this situation? & {[4]} \\ \hline b) & Whataretheethicalconsiderationsof(1)theChiefExecutiveOfficersrequestand(ii)Lianesdatingtheadjustingentries31December2022? & {[5]} \\ \hline c) & TowhatextentcanDianeaccruerevenuesanddeferexpensesandstillbeethical? & {[2]} \\ \hline d) & WriteamemorandumtotheChiefExecutiveOfficerofNEL,differentiatingtheoperatingcyclefromtheaccountingcycle.BesuretoincludekeystepsintheaccountingcycleandendyourmemorandumwithaparagraphexplainingoptionalstepsintheaccountingcycleCommunicationskills:layoutandconcisesentences & [9] \\ \hline \end{tabular}