Question

From the given information, calculate the following:

(i) Cost of revenue from operations.

(ii) Opening and closing inventory.

(iii) Quick assets.

(iv) Current assets.

Information :

Inventory turnover ratio 6 times, inventory at the end is Rs 6,000 more than the inventory in the beginning, revenue from operation (all credits) Rs 2,40,000 ,Gross profit 25$\%$ on cost, current liabilities Rs 80,000, quick ratio 0.80 : 1.

Answer 1

(i) Let the cost = Rs 100

Gross Profit = Rs 25

Revenue from operations (sales) = 100 + 25 = 125

Revenue from operations (Call credit) = 2,40,000 (Given)

Cost of revenue from operation = $2,40,000\times \frac{100}{125}=1,92,000$

(ii) Let opening inventory = $x$

Closing inventory will be = $x$ + Rs 6,000

Average inventory = $\frac{\text{Opening inventory + Closing inventory}}{2}$

= $\frac{x+x+6,000}{2}$

Inventory turn over ratio = $\frac{\text{Cost of revenue from operations}}{\text{Average inventory}}$

6 = $\frac{1,92,000}{\frac{x+x+6,000}{2}}$

$6x+6x+36,000=3,84,000$

$12x=3,84,000-36,000=3,48,000$

$x=\frac{3,48,000}{12}=29,000$

Opening inventory = 29,000

Closing inventory = 29,000 + 6,000 = 35,000

(iii) Quick assets = 80,000 (CL) $\times$ 0.84 = 64,000

(iv) Current assets = Quick asset + Inventory (Stock)

= 64,000 + 35,000 = 99,000