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All the sales made by a retailer are for cash, and her sale prices are fixed by doubling cost. Details recorded of her transactions for September 2006 are as follows:
1 Sept Inventories $40,000
30 Sept Purchases for month $ 60,000
Cash banked for sales for the month $95,000
Inventories $50,000Which two of the following conclusions could separately be drawn from this information?
1. $5000 cash has been stolen from the sales revenue prior to banking
2. Goods costing $50000 have been stolen.
3. Goods costing $2500 have been stolen
4. Some of the goods costing $2500 had been sold at cost price.A. 1 AND 2
B. 1 AND 3
C. 2 AND 4
D. 3 AND 4
The answer is B, but how are those conclusions arrived at?From the original information, the sales are 95,000, and the cost of sales is 40,000 + 60,000 – 50,000 = 50,000
So, something is wrong because the sales do not equal two times the cost.
(1) is correct, because if 5000 has been stolen then it means the sales were actually 100,000, which is 2 times the cost of 50,000
(3) is correct because if goods had not been stolen the closing inventory would have been 52500, which would have meant cost of sales would have been 47500. Sales of 95000 would then have been 2 times the cost.
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