Question

The cost of inventory as per physical verification as on 24th March was Rs.4,00,000. Between 24th March and 31st March , the following transaction took place:
(a) Purchases Rs.2,00,000 out of which 20% goods were returned
(b) Sales of Rs.2,00,000 out of which 20% goods were returned. Goods are sold at a profit of 25% on cost. The cost of inventory as per books is __________.

• A. Rs.4,00,000
• B. Rs.3,68,000
• C. Rs.4,32,000
• D. None of These

Answer 1

The correct option is C Rs.4,32,000

Cost of Inventory (Closing stock) as per books = Opening inventory + Purchases - Cost of goods sold

= 400000 (given) + 160000 (W.N.1) - 128000(W.N.2)

= 432000

Working notes (W.N.):

1. Purchases = Actual Purchases - Purchase Return = 200000 - 20% of 200000 (20/100*200000) = 200000 - 40000 = 160000
2. Cost of goods sold = Sales - Gross Profit = 160000 - 32000 = 128000

• Sales = Actual Sales - Sales Return = 200000 - 20% of 200000 ( 20/100*200000) = 160000
• Gross profit = 160000*25/125 = 32000
  

( if gross profit is 25/100 of cost then it is 25/125 of sales)