Ajay's annual inventory count took place on 7 july 20X6. The inventory value on this date was $38, 950. During the period from 30 june 20X6 to 7 july 20X6 following took place:
Sales: $6,500
Purchases: $4, 250
The mark up is 25% on cost
What is Ajay's inventory value at 30 june 20X6?
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Inventory evaluation
5y ago#1Why are you attempting questions for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers - they have answers!!
We need to work backwards from 7 July to find out the value on 30 June.
So on 30 June the purchases would not then have been bought, so we need to reduce the inventory by their cost of 4,250.
Also on 30 June, the sales would not have been sold and would still have been in inventory. So we need to increase the inventory by their cost which was 100/125 x 6,500 = $5,200.
So the value on 30 June was 38,950 - 4,250 + 5,200 = $39,900
Why did you multiply the cost of inventory by 100/125 where did that come from cab you please explain
5y ago#3$6,500 is not the cost of the inventory, it was the selling price.
Given that the selling price is the cost plus 25% of the cost, then the cost must be 100/125 times the selling price.
My free lectures on mark-ups and margins will help you on this.
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