Question

Question 3
From the following information, calculate the historical cost of inventories using adjusted
selling price method.
Sales during the year
Rs.200000
Cost of purchases
Rs 200000
Opening inventory
Nil
Closing inventory at selling price
Rs.50000​

Answer 1

Answer:

Gross profit = 200000+50000 - 200000

= 50000

gross profit ratio = 50000/250000 × 100 = 20%

sale at cost = 200000 -20000×20% = 160000

closing inventory at cost price = 50000 - 50000×20% = 40000.

Historical cost = 200000+40000-160000 = 80000

Answer 2

Concept

The gross profit is the profit earned from production activities which are done in factory.

Gross Profit =closing inventory+ sales-opening inventory-purchases-all direct expenses.

Given

sales=200000

purchase200000

opening inventory=0

closing inventory=50000

To find

Historical price

Explanation

GP will be calculated using the above formulas

Gross profit=200000+50000-200000-0

=50000

Purchases=0+200000-0

=200000

So by adjusting the cost and closing inventory gross profit is 50000.

#SPJ2