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The financial year of Mitex Co ended 21st dec 20X1. An inventory count on jan 4 20X2 gave total inventory value of 527,300.
The following transactions occurred between jan 1 and jan 4:
Purchase of goods – 7900
Sales of goods (gross profit margin 40% on sales) – 15000
Goods returned to a supplier – 800
What inventory value should be included in Mitex Co’s financial statements at 31 dec 20X1?
Do not simply set me a test question – presumably you have an answer in the same book as the question anyway. Say what is causing a you a problem and then I will try and help.
You need to work ‘backwards’ from the value at 4 Jan to the value on 31 December (so, for example, subtract the purchases made between the two dates).
For the sales, you need to add back the cost of the sales.
If the selling price is 15,000 and the margin is 40%, then the cost of the sales is 60% x 15,000.
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