Question

Ramesh consigned 2,000 MT of chemicals at a cost of Rs. 800 per MT to John. Ramesh paid freight & insurance charges of Rs. 20,000. Of the above , 500 MT were destroyed by fire during transit. John cleared the balance of 1,500 MT of chemicals and sold 1,000 MT at average price of Rs. 1,000 per Mt. John incurred the following expenses : Godown rent Rs. 5,000 Insurance Rs.3,000, clearing charges Rs. 4,500. Insurance claim received against fire Rs. 4,00,000 after admitting the salvage value Rs. 10,000. John was entitled to commission of 10% on sale proceeds. value of closing stock to be credited to Consignment A / c = ?

• A. Rs. 4,06,500
• B. Rs. 4,16,500
• C. Rs. 3,95,000
• D. Rs. 4,05,000

Answer 1

The correct option is B Rs. 4,16,500

Closing stock (in numbers) $=$ Opening stock $-$ Goods lost in transit $-$ Goods sold

$=$ $2,000$ $-$ $500$ $-$ $1,000$

$=$ $500$

Cost price of closing stock $=$ number of closing stock $\times$ Cost price per unit

$=$ $500$ $\times$ $800$

$=$ $4,00,000$

Consignor's non recurring expenses for closing stock $=$ $20,000$ $\times \frac{500}{2,000}$

$=$ $5,000$

Consignee's non recurring expenses for closing stock $=$ (clearing carges $\times$ $\frac{500}{1,500}$) $+$ salvage charges

$=$ ($4,500$ $\times \frac{500}{1500}$) $+$ $10,000$

$=$ $11,500$

Therefore,

Value of closing stock $=$ Cost price $+$ Consignor's expenses $+$ Consignee's expenses

$=$ $4,00,000$ $+$ $5,000$ $+$ $11,500$

$=$ $4,16,500$