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Private sector Performance Measurement

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Private sector Performance Measurement

  • This topic has 3 replies, 3 voices, and was last updated 2 months ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 24, 2022 at 9:31 am #672393
    Navasilas
    Member
    • Topics: 6
    • Replies: 4
    • ☆

    14. The trading account of Calypso for the year ended 30 June 20X0 is set out below:
    $ $
    Sales 430,000
    Opening inventories 50,000
    Purchases 312,500
    362,500
    Closing inventories (38,000)
    Cost of sales (324,500)
    Gross profit 105,500
    The following amounts have been extracted from the company’s statement of financial position at
    30 June 20X0.
    $
    Trade receivables 60,000
    Prepayments 4,000
    Cash in hand 6,000
    Bank overdraft 8,000
    Trade payables 40,000
    Accruals 3,000
    Declared dividends 5,000
    Calculate the inventories days (using average inventories) and the current ratio for Calypso Ltd for
    the period.
    Inventory days Current ratio
    A 33 days 1.25:1
    B 49 days 1.25:1
    C 49 days 1.93:1
    D 33 days 1.93:1

    HOW DID IT CALCULATE THE CURRENT RATIO AND WHY USED THESE VALUES????

    November 24, 2022 at 3:46 pm #672433
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51551
    • ☆☆☆☆☆

    The current ratio is current assets / current liabilities.

    The current assets are 60,000 + 4,000 + 6,000 = 70,000
    The current liabilities are 8,000 + 40.000 + 3,000 + 5,000 = 56,000

    Have you not watched our free lectures on this? The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.

    November 26, 2022 at 9:43 am #672634
    James124
    Member
    • Topics: 158
    • Replies: 136
    • ☆☆☆

    I am sorry to intruded but the Kaplan has not mentioned closing inventory as part of SoFP. They use in calculation to find Current ratio.

    November 27, 2022 at 9:05 am #672722
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51551
    • ☆☆☆☆☆

    I do not have Kaplan books and so I cannot check. However inventory is included in the calculation of the current ratio (but is not included when calculating the acid test / quick ratio). If Kaplan show differently then they are wrong or have mistyped.

    Both ratios are as explained in my free lectures.

  • Author
    Posts
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