Following information is given to you :
(I) Inventory Turmover Ratio 5 Times
(II) Inventory at the end is Rs. 5,000 more than the inventory in the beginning.
(III) Revenue from Operations (all credit) Rs. 2,00,000
(IV) Gross Profit Ratio 14 on cost.
(V) Current Liabilities Rs. 60,000.
(VI) Quick Ratio 0.75.
Calculate (i) Cost of Revenue from Operations, (ii) Opening Inventory Closing inventory, and (iii) Quick Assets and Current Assets.
Gross Profit is 14th of cost. Therefore, goods costing Rs. 100 is sold for Rs. 125.
If Revenue from Operations are 125, Cost is 100.
If Revenue from Operations are Rs. 2,00,000, Cost is 100125×2,00,000=Rs.1,60,000
Average Inventory =Cost of Revenue from OperationsInventory Turnover Ratio=Rs.1,60,0005=Rs.32,000
Opening Inventory = Rs. 32,000 - 1/2 of 5,000 = Rs. 29,500
Closing Inventory = Rs. 32,000 + 1/2 of 5,000 = Rs. 34,500
Current Liabilities are Rs. 60,000 and Quick Ratio is .75, therefore
Quick Assets = Rs 60,000 times .75 = Rs. 45,000
Current Assets = Quick Assets + Closing Inventory
= 45,000 + Rs. 34,500 = Rs. 79,500