Question 22 Chapter 4 of +2-B

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.

The solution of Question 22 Chapter 4 of +2-B: – 

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

 

 

What are Liquidity Ratios – Formulas and Examples

Comment if you have any question.

Also, Check out the solved question of previous Chapters: –

Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution

Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

2 Book 3 min 225x300 - Question 22 Chapter 4 of +2-B  - USHA Publication  12 Class
T.S. Grewal’s Analysis of Financial Statements

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