93 :- From the following information, determine Opening and Closing Inventories:
Inventory Turnover Ratio 5 times, Total Sales Rs 2,00,000, Gross Profit Ratio 25%. Closing Inventory is more by Rs 4,000 than the Opening Inventory.
Solution :-
Gross Profit = 25% of Sales
= 25/100 x 2,00,000
= Rs 50,000
Gross Profit = Revenue from Operations – Cost of Goods Sold
50,000 = 2,00,000 – Cost of Goods Sold
Cost of Goods Sold = Rs 1,50,000
Let the Opening Inventory be x
Closing Inventory = x + 4,000
Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory
5 = 1,50,000/[(x + x + 4,000)/2]
5 (2x + 4,000) = 1,50,000 x 2
10x + 20,000 = 3,00,000
10x = 2,80,000
x = Rs 28,000
Therefore, Opening Inventory is Rs 28,000.
Closing Inventory = 28,000 + 4,000
= Rs 32,000