5.6 Incomplete records (3)
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1.
Question 3
The following information is available for Green Grocers for the year ended 31 December 2023:
- Sales Revenue: £80,000
- Cost of Goods Sold: £40,000
- Closing Stock: £8,000
- Opening Stock: £6,000
- Debtors: £12,000
- Creditors: £5,000
Calculate: (a) Gross Profit (b) Trade Receivables (c) Trade Payables.
(a) Gross Profit:
Gross Profit = Sales Revenue - Cost of Goods Sold
Gross Profit = £80,000 - £40,000 = £40,000
(b) Trade Receivables:
Trade Receivables = Sales Revenue - (Closing Stock - Opening Stock)
Trade Receivables = £80,000 - (£8,000 - £6,000) = £80,000 - £2,000 = £78,000
(c) Trade Payables:
Trade Payables = Cost of Goods Sold + (Closing Stock - Opening Stock)
Trade Payables = £40,000 + (£8,000 - £6,000) = £40,000 + £2,000 = £42,000
2.
Question 2
A business has an inventory turnover ratio of 8.5. The cost of goods sold is £45,000. Calculate the average inventory value.
Understanding Inventory Turnover: The inventory turnover ratio is calculated as Cost of Goods Sold / Average Inventory Value.
Rearranging the Formula: Average Inventory Value = Cost of Goods Sold / Inventory Turnover Ratio
Calculation: Average Inventory Value = £45,000 / 8.5 = £5,294.12 (rounded to the nearest pound)
Therefore, the average inventory value is £5,294.12.
3.
Question 1
The cost price of an item is £20. It is sold at a mark-up of 40%. The selling price is then marked up again by 20% to arrive at the retail price. Calculate the retail price.
Step 1: Calculate the mark-up amount on the cost price.
- Mark-up = 40% of £20 = 0.40 x £20 = £8
Step 2: Calculate the selling price.
- Selling Price = Cost Price + Mark-up = £20 + £8 = £28
Step 3: Calculate the mark-up amount on the selling price.
- Mark-up = 20% of £28 = 0.20 x £28 = £5.60
Step 4: Calculate the retail price.
- Retail Price = Selling Price + Mark-up = £28 + £5.60 = £33.60
Therefore, the retail price is £33.60.