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September 11, 2016 at 5:47 pm
Sir, could you please help to explain Q5 in the quiz. How come we need to add back the goods returned? On 4th Jun, the inventory figure should have reflected this 700, shouldn’t we work back by deducting it ?
John Moffat says
September 11, 2016 at 6:55 pm
We wish to calculate the inventory as at 31 May.
They returned goods to the supplier between 31 May and 4 June, so as at 31 May the inventory will have been higher than it was on 4 June.
September 13, 2016 at 4:47 pm
Aiya, I read the question wrongly. Thank you, sir.
September 13, 2016 at 5:52 pm
You are welcome 🙂
February 20, 2016 at 9:25 am
A sole trader fixes her prices by adding 50 per cent to the cost of all goods purchased. On 31 October 20X3 a fire destroyed a considerable part of the inventory and all inventory records.
Her trading account for the year ended 31 October 20X3 included the following figures:
$ $ Sales 281,250 Opening inventory at cost 183,600 Purchases 249,200 432,800 Closing inventory at cost 204,600 228,200 Gross profit 53,050
Cost of sales = $281,250 x 2/3 = $187,500
Loss of inventory = $228,200 – 187,500 = $40,700
so why is it $281,250 x 2/3 why do we need to multiply 2/3?
February 20, 2016 at 10:17 am
In future you must ask questions like this in the Ask the Tutor Forum, and not as a comment on a lecture.
For every $2 cost, then add on a profit of $1 (50% x $2), and get a selling price of $3. So for every $3 selling price, the cost is $2. So the cost is always 2/3 x selling price.
February 22, 2016 at 9:26 pm
thanks John really appreciate I almost there! this is a topic requires a private tutor!
October 28, 2015 at 11:37 am
I am still confused with this question.
stion 4 Chapter 18 Silver Co made sales of $193,200 during the year ended 31 August X1. Inventory decreased by $13,200 over the year and all sales were made at a mark up of 42%. What was the cost of purchases during the year, to the nearest $1,000?
A $149,000 B $136,000 C $123,000 D $109,000
October 28, 2015 at 12:21 pm
If there is a mark-up of 42% then for every 100 cost, the profit is 42 and the sales are 142.
So for sales of 193200, the cost must have been 100/142 x 193200 = 136,056
Of that cost, 13,200 came out of inventory and so the remainder of 122,856 were purchases.
October 28, 2015 at 12:47 pm
Thank you Sir, I got it now
October 28, 2015 at 3:21 pm
September 30, 2015 at 1:32 am
Please do explain question 2 & 3? It’s very confusing too me. I’m having a lot of trouble with it.
September 30, 2015 at 7:27 am
Question 2: We know the inventory on 4 June and we need to work backwards to find out what it was on 31 May. So we need to subtract any purchases made between the dates (8,600) because they were not there on 31 May; we need to add back the cost of any sales made between the dates (70% x 14,000) because they were there on 31 May; and we need to add back any returns made between the dates (700) because they were there on 31 May. So inventory on 31 May = 836,200 – 8,600 + 9,800 + 700 = 838,100
Question 3: Revenue was understated, so actual revenue is 10,000 higher at 90,000; and actual profit is 10,000 higher at 30,000. Closing inventory was overstated, so revenue is not affected and stays at 90,000, but cost of sales in understated and therefore profit overstated by 5,000 and should be 25,000.
So profit percentage = 25,000/90,000 = 27.8%
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