If closing inventory is accounted for as Rs. 2,40,000 instead of Rs. 1,80,000:

gross profit as well as net profit will be exaggerated

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gross profit will be exaggerated and net profit understated

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gross profit will be exaggerated but net profit correctly reported

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gross profit and net profit would both be understated

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Solution

The correct option is A
gross profit as well as net profit will be exaggerated

If closing inventory is accounted for as Rs. 2,40,000 instead of Rs. 1,80,000, gross profit as well as net profit will be exaggerated by Rs. 60,000.

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Similar questions

Q. If closing inventory is accounted for as Rs. 2,40,000 instead of Rs. 1,80,000. Which among the following will have an effect ?

Q. From the following data, calculate Inventory Turnover Ratio:
Total Sales Rs. 5,00,000; Sales Return Rs. 50,000;
Gross Profit Rs. 90,000; Closing Inventory Rs. 1,00,000; Excess of Closing Inventory over opening inventory Rs. 20,000.

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.

Mr. Biggs bought several lots of inventory throughout a period for the following amounts Rs. 1,100, Rs. 2,200, Rs. 3,300, Rs. 4,400. He made sales on credit throughout this period of Rs. 1,100, Rs. 2,200, Rs. 3,300, Rs. 4,400. He sells inventory at cost plus 25%. His closing inventory at the end of the period is valued at:

Opening Inventory Rs. 29,000; Closing Inventory Rs. 31,000; Revenue from Operations (Sales) Rs. 3,20,000; Gross Profit Ratio 25% on Revenue from Operations.
Calculate:
(i) Inventory Turnover Ratio and
(ii) Average Age of Inventory.

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If closing inventory is accounted for as Rs. 2,40,000 instead of Rs. 1,80,000:

The correct option is A gross profit as well as net profit will be exaggerated If closing inventory is accounted for as Rs. 2,40,000 instead of Rs. 1,80,000, gross profit as well as net profit will be exaggerated by Rs. 60,000.

The correct option is A
gross profit as well as net profit will be exaggerated

If closing inventory is accounted for as Rs. 2,40,000 instead of Rs. 1,80,000, gross profit as well as net profit will be exaggerated by Rs. 60,000.