Question

Unimax's Quicky (Quick Revision of Accountancy-il) 134 111. Opening Inventory of a firm is ? 1.00.000. Cost of Revenue from operation is 6,00.000. Inventory Turnover Ratio is 6 Times. Its Closing Inventory will be (b) Nil (d) 1,00,000 (a) 83.333 16 666
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Answer 1

Given :

•° Opening inventory = Rs.1,00,000

°• Cost of revenue from operation = Rs. 6,00,000

•° Inventory turnover ratio = 6 times

Solution :

We've to find out closing inventory

• As per formula of Inventory turnover ratio

→ Inventory turnover ratio = Cost of revenue from operation/Average inventory

• Average inventory = opening inventory + closing inventory/2

Let the closing inventory be x

$\implies \sf 6 = \dfrac{600000}{\dfrac{(100000 + x)}{2} }$

$\implies \sf 6 = 600000 \times \dfrac{2}{(100000 + x)}$

$\implies \sf 6 =\dfrac{1200000}{(100000 + x)}$

$\implies \sf 6(100000 + x) =1200000$

$\implies \sf (100000 + x) = \dfrac{1200000}{6}$

$\implies \sf (100000 + x) = 200000$

$\implies \sf x= 200000 - 100000 = 100000$

•°• Closing inventory = x = 100000

Answer 2

Given:

• Opening inventory = Rs 1,00,000
• Cost of RFO [Revenue From Operations] = Rs 6,00,000
• Inventory turnover ratio is 6 times.

To find: The closing inventory.

Answer:

Inventory turnover ratio = Cost of RFO ÷ Average inventory

As per the data given to us,

6 = Rs 6,00,000 ÷ Average inventory

Average inventory = Rs 6,00,000 ÷ 6

Average inventory = Rs 1,00,000

Average inventory = (Opening inventory + Closing inventory) ÷ 2

Rs 1,00,000 = (Rs 1,00,000 + Closing inventory) ÷ 2

Rs 2,00,000 = Rs 1,00,000 + Closing inventory

Closing inventory = Rs 2,00,000 - Rs 1,00,000

Closing inventory = Rs 1,00,000

Therefore, the closing inventory is (d) Rs 1,00,000.