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I have slolved all the questions of Chapter 18 Markup and Margins…I’m following the Open Tuition Acca notes of F3, while solving the Six Test questions of chapter 18, none of my answer matching the right answer, though i have tried the best approach.
All i wanted to know, is there any possiblity that given answers in notes have probability of being wrong?
For example kindly solve the answer of following of two qtns for me so that i can check where i’m going wrong.Question 1: A fire on 30 Sept destroyed some of the company inventory and its records.
The following info is available:
Inventory 1 Sept 318,000
Sales for Sept 612,000
Purchases for Sept 412,000
Inventory in good Good condition at 30 Sept 214,000
Standard Gross Profit percentage on sales 25%
Based on above what is the value of the inventory lost?Question 2: The draft accounts of Anthea Co. for the year ended 31 Dec 20X9 include the following:
Revenue 80,000
Gross Profit 20,000It was subsequently discovered that the revenue had been understated by 10,000 and closing inventory overstated by 5000. After correction of these errors the gross profit percentage will be what ?
Kindly help out with the solutions not only with the answers. So that i can get where i’m wrong.
Looking forward to see responses soon.Simron
Question 1:
Sales are 612,000, and so the gross profit is 612,000 x 25% = 153,000.
So the cost of goods sold is 612,000 – 153,000 = 459,000The opening inventory plus the purchases = 318,000 + 412,000 = 730,000
So…..if there had not been a fire, the closing inventory should have been 730,000 – 459,000 = 271,000
However the actual inventory is only 214,000, and so the value of one inventory lost must be 271,000 – 214,000 = 57,000
Question 2:
Since the revenue is understated by 10,000, the correct revenue should be 90,000 and also the correct profit is 10,000 higher at 30,000.
In addition, the closing inventory is overstated. This will not affect the revenue, but lower inventory means that the profit will be lower by 5,000 which gives 30,000 – 5,000 = 25,000
So the GP percentage is 25,000 / 90,000 = 27.78%
It is impossible to promise that there is never ever a mistake in the answers in the Course Notes, however I think you can be confident that the answers are all correct 🙂
(PS If you want an answer to a question from me, then ask your questions in the ‘Ask ACCA Tutor’ forums. It is not possible for use to read every post in the general forums and I might miss questions asked there)
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