revenue from operations 800000, inventory turnover ratio 5 gross profit 25%. find out the value of closing inventory, if closing inventory is 20000 more than opening inventory.
Answers
COGS = Opening Stock + Purchases + Closing Stock
Explanation:
Cost of Goods Sold = Opening Stock + Purchases + Closing Stock
= 40,000 + 3,20,000 − 1,20,000 = 2,40,000
(a) Sale of goods for Rs 40,000 (Cost Rs 32,000)- Increase
Reason: This transaction will decrease stock at the end (closing stock). Decrease in closing stock will result increase the proportion of Cost of Goods Sold and decrease in Average Stock
(b) Increase in value of Closing Stock by 40,000- Decrease
Reason: Increase in Closing Stock results decrease in Cost of Goods Sold and increase in Average Stock.
(c) Goods purchased for Rs 80,000- Decrease
Reason: This Transaction increases the amount of Closing Stock. Increase in Closing Stock reduces the proportion of Cost of Goods Sold and Increase in Average Stock.
(d) Purchase Return Rs 20,000- Increase
Reason: It will result decrease in Cost of Goods Sold and Average Stock with same amount.
(e) Goods costing Rs 10,000 withdrawn for personal use- Increase
Reason: Drawing of goods will decrease the amount of Closing Stock and increase in Cost of Goods Sold.
(f) Goods costing Rs 20,000 distributed as free sample- Increase
Reason: Goods distributed as free sample reduces Closing Stock. Reduction in Closing Stock will result increase in Cost of Goods Sold and decrease in Average Stock.