Question

Cash sales 1.5 times of credit sales. Credit sales 1,20,000, purchases 1,40,000 rate of gross profit 25% on cost. What is the value of closing stock?

Answer 1

The closing stock is - 85000 Rs which is not possible.

Explanation:

We have given credit sales = 120000 Rs

Cash sales is 1.5 times of credit sales

So cash sales = 1.5×120000 = 180000 Rs

Purchase = 140000 Rs

Gross profit = 25%

Total sales = cash sales + credit sales = 120000+180000 = 300000 Rs

So gross profit = 300000 x 25 / 100 = 75000  Rs

Cost of goods sold = sales - gross profit = 300000 - 75000 = 225000 Rs

We know that:

Cost of goods sold = Opening stock + purchase - closing stock

So 225000 = 0 + 140000 - closing stock

So closing stock = 140000 - 225000 = - 85000 Rs

Thus the closing stock is - 85000 Rs which is not possible.

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Answer 2

Given:

Cash sales = 1.5 times of credit sales

Credit sales = 1,20,000

Purchase = 1,40,000

Gross profit = 25% on cost

To find:

Value of the closing stock = ?

Solution:

Since it is given that the gross profit is 25% on cost that also equal to 20% on sales

The total sales is

= Credit sales + cash sales

= 1,20,000 + 1,20,000 × 1.5 times

= 1,20,000 + 1,80,000

= 3,00,000

So, the gross profit is

= 3,00,000 × 20%

= 60,000

As we know that

Cost of goods sold = Total sales - gross profit

                                = 3,00,000 - 60,000

                                = 2,40,000

And,

Cost of goods sold = Opening stock + purchase - closing stock

2,40,000 = 0 + 1,40,000 - closing stock

So, the closing stock is 100,000

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