Question 22 Chapter 4 of +2-B
Table of Contents
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
- Chapter No. 1 – Accounting Not for Profit Organisations
- Chapter No. 2 – Partnership Accounts – I (Introduction)
- Chapter No. 3 – Partnership Accounts – II (Goodwill: Nature and Valuation)
- Chapter No. 4 – Partnership Accounts – III (Reconstitution of Partnership)
- Chapter No. 5 – Partnership Accounts – IV (Admission of A Partner)
- Chapter No. 6 – Partnership Accounts – V (Retirement and Death of A Partner)
- Chapter No. 7 – Partnership Accounts – VI (Dissolution of Partnership Firm)
- Chapter No. 8 – Company Accounts (Share Capital)
- Chapter No. 9 – Company Accounts (Issue of Debentures)
- Chapter No. 10 – Company Accounts (Redemption of Debentures)
Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis- Comparative and Common Size
- Chapter No. 4 – Ratio Analysis
- Chapter No. 5 – Cash Flow Statement
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
