Question

If average inventory is rupees 100000 and closing inventory is 2 times more than that in the beginning then what will be the amount of closing inventory

Answer 1

Answer:

Inventory turnover ratio = Cost of goods sold ( WN 1)

                                          ----------------------------------------

                                               Average inventory (WN 2)

                                          = 3,60,000

                                           -----------------

                                             90,000 

                                         = 4 Times

Working notes:-

1) Cost of goods sold = Gross sales - (Sales return + gross profit)

                                    = 5,00,000 - (50,000 + 90,000)

                                    = 3,60,000.

2) Average Inventory = 1,00,000 + 80,000

                                      -------------------------------

                                                      2

                                    = 90,000. 

Closing inventory is 20,000 more than opening inventory hence opening inventory is 1,00,000 - 20,000 = 80,000.