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 $281250
cost of sales
opening inventories $183600
purchases $249200
closing inventories $204600
cost of sales $228200
gross profit $53050
Using this information, what inventory loss has occurred?
$61,050
$87,575
$40,700
$110,850
I wasn't sure how to tackle this question because it didn't look like any inventory loss had occurred at all. I wasn't sure how to find a different cost of sales figure to compare to the one given so the difference would be the inventory loss
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Incomplete records
5y ago#1They add 50% to the cost in order to get the selling price.
Given that the sales were $281,250, the cost of these sales must therefore have been 100/150 x 281,250 = $187,500.
That means that the closing inventory should have been 183,600 + 249,200 - 187,500 = $245,300.
Given that the actual inventory was only $204,600, they must have lost the difference of 245,300 - 204,600 = $40,700.
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