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Question 22 Chapter 4 of +2-B
I. Liquidity Ratios
22. (Calculation of Current assets) A company’s inventory turnover id 5 times. Inventory at the end
of the year is ₹ 4,000 more than the inventory at the beginning of the year. Sales (Revenue from Operation) during the year (all credit) were ₹ 3,00,000. The rate of gross profit on the sale is 20%. Current liabilities at the end of the year were ₹ 60,000. The quick ratio is 1: 1.
Calculate the Current assets at the end of the year.
| Current Assets | = | Quick Assets + Closing inventory |
| Current Liabilities | = | ₹ 60,000 |
| Quick ratio | = | 1 : 1 |
| Quick Assets | = | ₹ 60,000 |
| Inventory turnover ratio | = | 5 times |
| Sales | = | ₹ 3,00,000 |
| Rate of gross profit on sale | = | 20% |
| Cost of goods sold | = | ₹ 2,40,000 |
| Inventory turnover ratio | = | Cost of goods sold |
| Average Inventory |
| 5 times | = | Cost of goods sold |
| Average Inventory |
| Let assume that opening inventory | = | x |
| = | X + ₹ 4,000 |
| 5 times | = | ₹ 2,40,000 |
| x + (x + ₹ 4,000) | ||
| 2 |
| 5 times | = | ₹ 2,40,000 |
| 2x + ₹ 4,000) | ||
| 2 |
| Inventory turnover ratio | = | ₹ 2,40,000 |
| x + ₹ 2,000) |
| 5 (x + ₹ 2,000) | = | ₹ 2,40,000 |
| 5x + ₹10,000 | = | ₹ 2,40,000 |
| 5x + ₹10,000 | = | ₹ 2,40,000 - ₹ 10,000 |
| 5x | = | ₹ 2,30,000 |
| X | = | ₹ 2,30,000 |
| 5 |
| x | = | ₹ 46,000 |
| Opening Inventory | = | ₹ 46,000 |
| Closing Inventory | = | ₹ 46,000 + ₹ 4,000 |
| Closing Inventory | = | ₹ 50,000 |
| New Current Assets | = | Quick Assets + Closing Inventory |
| = | ₹ 60,000 + ₹ 50,000 | |
| = | ₹ 1,10,000 |
https://tutorstips.com/what-are-liquidity-ratios-formulas-and-examples/
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Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "Question 22 Chapter 4 of +2-B - USHA Publication 12 Class", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to USHA Publication Part 2 volume I.
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