Question 51 Chapter 4 of +2-B

Question 51 Chapter 4 of +2-B

III. Activity Ratios

Trade Receivable Turnover Ratio

51. (Net Purchases/Accounts Payable T/O Ratio/Average age of Creditors) You are given the following data.
(a) Gross profit at 30% on sales (Revenue from Operation) = ₹ 60,000
(b) Inventory turnover = 7 times
(c) The opening inventory is ₹ 5,000 less than the closing inventory.
(d) Trade payable (opening) Z ₹ 30,000 ; Trade payable (closing) Z ₹ 38,000.
Find out (a) Net purchases (b) Trade payable turnover (c) Average age of trade payables.

 

The solution of Question 51 Chapter 4 of +2-B: – 

Gross profit ratio=30%
If Sales=₹ 100
Gross profit=₹ 30
Cost of goods sold=₹ 100 – ₹ 30
 =₹ 70
Cost of goods sold=₹ 60,000
Cost of goods sold=70X₹ 60,000
30
 =₹ 1,40,000  

 

Inventory Turnover Ratio=Cost of goods sold
Average inventory
   
7=1,40,000
Average inventory
   
Average Inventory=1,40,000
7
   
Average Inventory=₹ 20,000
Average Inventory=Opening Inventory + Closing Inventory
2
Let assume Opening Inventory=X
Closing Inventory=x + ₹ 5,000
Average Inventory=x + ( x + ₹ 5,000)
2
   
₹ 20,000=x + ( x + ₹ 5,000)
2
   
₹ 20,000 x 2=2x + ₹ 5,000
₹ 40,000=2x + ₹ 5,000
₹ 40,000 – ₹ 5,000=2x
x=₹ 35,000
2
   
Opening Inventory=₹ 17,500
Closing Inventory=Opening Inventory + ₹ 5,000
 =₹ 17,500+ ₹ 5,000
 =₹ 22,500

(a) Computation of net purchases

Cost of goods sold=Opening Inventory + Purchases – Closing Inventory
₹ 1,40,000=₹ 17,500+ Purchases – ₹ 22,500
Purchases=₹ 1,40,000 – ₹ 5,000
 =₹ 1,45,000

(b) Accounts Payable Turnover Ratio

 =Net Purchases (Credit)
Average Accounts Payable
Average accounts payable=Opening accounts payable + Closing accounts payable
2
 =₹ 30,000 + ₹ 38,000
2
   
 =₹ 34,000

 

Accounts Payable Turnover Ratio=₹ 1,45,000
₹ 34,000
   
 =4.26 times
   
Average age of Creditors=Number of days in a year
Accounts Payable Turnover Ratio
 =356
4.26
Average trade receivable=85.6 Days


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 51 Chapter 4 of +2-B  - USHA Publication  12 Class
T.S. Grewal’s Analysis of Financial Statements

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