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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 53,050Sir ! In book ans is. 281250 * 2/3 = 187500
228200 – 187500 = 40700Sir , how 2/3 come I didn’t understand. Can you please explain this and the concept of qno ?
If they add 50% to the cost, then for every $100 cost they add a profit of $50 giving a selling price of $150.
Putting it the other way round, for every 150 selling price the cost is 100.
So if the sales as 281,250 then the cost of sales must be 100/150 x 281,250. (100/150 is the same as 2/3)
I do not know what you mean by ‘qno’ but I work through many examples like this in my free lectures on mark-ups and margins. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
A business’s bank balance increased by $750,000 during its last financial year. During the same period
it issued shares of $1 million and repaid a loan note of $750,000. It purchased non-current assets for
$200,000 and charged depreciation of $100,000. Working capital (other than the bank balance)
increased by $575,000.
What was its profit for the year?
i don understand why current asset is not decreased. when purchased non-current asset?
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