Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › FA BPP Revision Kit 2020-2021, Incomplete Records, 20.3 & 20.7 , Pg 97 , 98

- This topic has 3 replies, 2 voices, and was last updated 2 years ago by John Moffat.

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- January 27, 2021 at 6:43 pm #608271
Greetings sir,

In 20.3, the calculation is based on the rule that gross profit is always 40% of the sales revenue.

Sales margin calculation in short.My issue: Why I cannot use the doubtful sales revenue to calculate the doubtful COS and then subtract it from the Actual COS mentioned in Question, in order to find the difference of theft ?

METHOD A

181600 (doubtful sales) x 60/100 = 108,960 (doubtful COS)

(Actual COS) 114,000 – 108,960 (doubtful COS) = 5,040 differenceEven if I use the gross profit, it comes the same:

METHOD B

(Gross Profit) 67,600/181,600 (doubtful sales) x 100% = 37.225%

40% – 37.225% = 2.775%

2.775% / 100% x 181,600

= $5,040The answer however is $8,400 which is calculated using COS:

METHOD C

114,000(Actual COS) x 100/60 =

(Actual sales) 190,000 – 181,600 (Doubtful Sales)

= $8,400However in Q.20.7, when I use the same METHOD A, it appears to be the only way to get the right answer (sale margin being 25%. Therefore:

612,000(sale) x 75/100 = 459,000 (COS of sales margin).

516,000(COS of Op.Inv+Purchase-Cl.Inv) – 459,000 (COS of sales margin) = Ans) 57,000 Inventory difference.)So why in Q 20.3 this method fails (calculation from sales to COS) and in Q20.7, this method wins?

Is it because in 20.3 Sales is doubtful, so we use COS to Sales as a base for calculation, and in 20.7 COS is doubtful, so we use Sales to COS as a base ? If I am correct, could you please elaborate more ?

January 28, 2021 at 9:21 am #608321The $5,040 you have calculated in the first question is the cost of the sales lost.

This is not what the question asks for – it asks for the revenue that has been stolen.The selling price of the lost cost of sales (and therefore the revenue that has been stolen) is 100/60 x $5,040 = $8,400.

How you arrive at the $8,400 is irrelevant.

January 28, 2021 at 12:46 pm #608347Thankyou sir.

January 28, 2021 at 4:55 pm #608373You are welcome 🙂

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