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Dear Sir,
With due respect, pls help me with the following question:
All the sales made by a retailer are for cash, and her sale prices are fixed by doubling cost. Details recorded on her transaction for September 20X6 are as follows:
1 Sept. Inventories $ 40,000
30 Sept. Purchases $ 60,000
Cash banked for sales for month $ 95,000
Inventories $ 50,000
Which two of the following conclusions could separately be drawn from this information?1. $ 5,000 cash has been stolen from the sales revenue prior to banking
2. Goods costing $ 5,000 have been stolen
3. Goods costing $ 2,500 have been stolen
4. Some goods costing $ 2,500 had been sold at cost price.A. 1 & 2
B. 1 & 3
C. 2 & 4
D. 3 & 4The answer in BPP exam kit gave correct answer as option B.
I calculated the cost of sales in the normal way, resulting with answer $ 50,000. Since the Exam kit gave no explanation to this question at all, I just couldn’t understand why the question used option 2 & 3 as the right answer.
On the figures in the question the cost of sales comes to 50,000.
Since the profit should be 50% of the sales (or twice the cost of sales), then it means either the cost is 50,000 and therefore the sales were 100,000. Since they only banked 95,000 that would means that 5,000 cash had been stolen.
Alternatively, since the sales were 95,000, the cost of sales should have been 47,500 – not 50,000. That would mean that inventory of 2,500 had been stolen.
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