Question

Bharat Indian oil is a bulk distributor of petrol . A periodic inventory of petrol on hand is taken when the book are closed at the end of each month. The following summary of information is available for the month:
Sales between 2nd and 29th June Rs.9,45,000
General administration cost Rs.25,000
Opening Stock :1,00,000 litres @ Rs.3 per litre Rs.3,00,000
Purchases (including freight inward):
June 1 2,00,000 litres @ Rs 2.85 per litre
June 30 1,00,000 litres @ 3.03 per litre
June 30 Closing stock 1,30,000 litres.
The profit or loss for June using LIFO method of inventory Method is _______________.

• A. Rs.1,95,500
• B. Rs.1,65,000
• C. Rs.1,40,000
• D. Rs.1,95,000

Answer 1

The correct option is C Rs.1,40,000

Net Profit = Sales - Cost of goods sold - General admin cost

= 9,45,000 - 7,80,000(WN 1) - 25,000

= 1,40,000

Calculation of quantity of goods sold = Opening stock + purchases - Closing stock

= 1,00,000 + 3,00,000 - 1,30,000

= 2,70,000

Amount of goods sold (under FIFO) = 1,00,000 x 3 = 3,00,000

1,70,000 x 2.85 = 4,84,500

= 7,84,500