Credit purchases are ₹5,50,000 and purchase returns are ₹50,000. What will be the value of average trade payables if trade payables turnover ratio is 5?

[2 marks]

₹90,000

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₹10,000

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₹1,00,000

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₹5,50,000

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Solution

The correct option is C ₹1,00,000
Net Credit Purchase =
Credit Purchase - Purchase Return
= ₹5,50,000 - ₹50,000
= ₹5,00,000

Average Trade Payable

= $\frac{N e t C r e d i t P u r c h a s e}{T r a d e P a y a b l e T u r n o v e r R a t i o}$
= $\frac{₹ 5, 00, 000}{5}$
= ₹1,00,000

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Similar questions

Q. Credit purchases are Rs. 5,50,000 and purchases return are Rs. 50,000. What will be the value of Average Trade Payables if Trade Payables Turnover Ratio is 5?

Q. Trade payables turnover ratio is the ratio of net credit purchases to the average .

Calculate Trade Payables Turnover Ratio from the following information :

$\begin{matrix} Rs. Credit Purchases during the year & 6, 20, 000 Purchase Returns (Out of credit purchase) & 20, 000 Opening Creditors & 1, 00, 000 Closing Creditors & 1,40,000 Opening Bills Payable & 25,000 Closing Bills Payable & 35,000 \end{matrix}$

Q. Calculate Trade payables Turnover Ratio from the following information:
Opening Creditors ₹ 1,25,000; Opening Bills Payable ₹ 10,000; Closing Creditors ₹ 90,000; Closing bills Payable ₹ 5,000; Purchases ₹ 9,50,000; Cash Purchases ₹ 1,00,000; Purchases Return ₹ 45,000.

Calculate Trade Payables Turnover Ratio for the year 2018-19 in each of the alternative cases:
Case 1 : Closing Trade Payables ₹ 45,000; Net Purchases ₹ 3,60,000; Purchases Return ₹ 60,000; Cash Purchases ₹ 90,000.
Case 2 : Opening Trade Payables ₹ 15,000; Closing Trade Payables ₹ 45,000; Net Purchases ₹ 3,60,000.
Case 3 : Closing Trade Payables ₹ 45,000; Net Purchases ₹ 3,60,000.
Case 4 : Closing Trade Payables (including ₹ 25,000 due to a supplier of machinery) ₹ 55,000; Net Credit Purchases ₹ 3,60,000.

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Credit purchases are ₹5,50,000 and purchase returns are ₹50,000. What will be the value of average trade payables if trade payables turnover ratio is 5? [2 marks]

The correct option is C ₹1,00,000Net Credit Purchase = Credit Purchase - Purchase Return = ₹5,50,000 - ₹50,000 = ₹5,00,000 Average Trade Payable = Net Credit PurchaseTrade Payable Turnover Ratio = ₹5,00,0005 = ₹1,00,000

Credit purchases are ₹5,50,000 and purchase returns are ₹50,000. What will be the value of average trade payables if trade payables turnover ratio is 5?

[2 marks]

The correct option is C ₹1,00,000
Net Credit Purchase =
Credit Purchase - Purchase Return
= ₹5,50,000 - ₹50,000
= ₹5,00,000

Average Trade Payable

= $\frac{N e t C r e d i t P u r c h a s e}{T r a d e P a y a b l e T u r n o v e r R a t i o}$
= $\frac{₹ 5, 00, 000}{5}$
= ₹1,00,000