Question

Q. 66. A company's inventory turnover is 5 times. Inventory at the end of the
year is 4,000 more than inventory at the beginning of the year. Revenue from
Operations during the year (all credit) were 3,00,000. Rate of Gross Profit is 25% on
cost of Revenue from Operations. Current Liabilities at the end of the year were
50,000. Quick Ratio is 1 : 1. Calculate :-
(i) Cost of Revenue from Operations (Cost of Goods Sold).
(ii) Opening inventory.
(iii) Closing inventory:
(iv) Quick Assets.
(v) Current Assets at the end.​

Answer 1

Answer:

gross profit is on cost . Cost is not given in question so we assume cost of revenue from operation be x

cost of revenue of operation =

revenue from operation - gross profit

x = 300000 - x× 25/100

x =300000 -x/4

x+ x/4 = 300000

5x/4 = 300000

5x = 1200000

x= 240000

cost of revenue from operation = 240000

Inventory turnover ratio

= cost of revenue from operation/ average inventory

5 times = 240000/average inventory

5× average inventory =240000

average inventory =240000/5

= 48000

average inventory=

opening inventory+ closing inventory/2

48000 = opening inventory+closing inventory/2

opening inventory+closing inventory

= 48000*2= 96000

it is given that closing inventory is 4000 more than opening inventory

assume opening inventory be x

opening +closing =96000

x +( x+4000) =96000

2x=96000-4000

x= 92000

x= 46000

so opening inventory is 46000

and closing inventory is46000+4000= 50000

Quick ratio = liquid assets/ current liability

1/1= liquid assets/50000

liquid assets = 50000

closing inventory is the part of current assets

inventory= current assets- liquid assets

50000 = current assets-50000

current assets = 100000