Question

Q2. Calculate Inventories in the beginning of the year if the following information is
given
Cost of Revenue From Operations (Cost of Goods Sold) = Rs. 4,50,000;
Inventories at the end of the year = Rs.1,25,000; and
Inventory Turnover Ratio = 4 Times.​

Answer 1

Answer:

Inventory turnover Ratio =

Cost of revenue from operation /average inventory

4. =. 450000/average inventory

Average inventory = 450000/4

Average inventory = 112500

Explanation:

Average inventory = opening inventory +closing inventory/2

112500*2= opening inventory + closing inventory

225000 = opening inventory + 125000

opening stock = 225000-125000

= 100000

Answer 2

Explanation:

Solution :

Inventory Turnover Ratio = 4 Times

★ Inventory Turnover Ratio :

$\sf{\longrightarrow{\dfrac{Cost \: of \: Revenue \: from \: Operation}{Average \: Inventory}}}$

$\sf{\longrightarrow{\dfrac{Cost \: of \: Revenue \: from \: Operation}{ \frac{Ope.ning \: Inventory \: + \: Closing \: Inventory}{2}}}}$

$\sf{\longrightarrow\:4\:=\:{\dfrac{4,50,000}{Average \: Inventory}}}$

Average Inventory = 4,50,000/4

Average Inventory = Rs. 1,12,500

★ Average Inventory =

$\sf{\longrightarrow{\dfrac{Ope.ning \: Inventory \: + \: Closing \: Inventory}{2}}}$

$\sf{\longrightarrow\:1,12,500\:=\:{\dfrac{Ope.ning \: Inventory \: + \: 1,25,000}{2}}}$

$\longrightarrow$ 1,12,500 × 2 = Opening Inventory + 1,25,000

$\longrightarrow$ 2,25,000 = Opening Inventory + 1,25,000

$\longrightarrow$ 2,25,000 - 1,25,000 = Opening Inventory

$\longrightarrow$ 1,00,000 = Opening Inventory

Therefore, Inventories in the beginning of the year = Rs. 1,00,000.