Question 72 Chapter 4 of +2-B - T.S. Grewal 12 Class

Question 72 Chapter 4 of +2-B

Table of Contents

The solution of Question 72 Chapter 4 of +2-B: –

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

Interest Coverage Ratio

72. From the following information, determine Opening and Closing inventories:
Inventory Turnover Ratio 5 Times, Total sales ₹ 2,00,000, Gross Profit Ratio 25%. Closing Inventory is more by ₹ 4,000 than the Opening Inventory.

The solution of Question 72 Chapter 4 of +2-B: –

Total Sales	=	Rs. 2,00,000
Gross Profit	=	25% on Sales

Gross Profit	=	Rs.2,00,000	x	25
				100
	=	Rs. 50,000

Cost of goods sold	=	Total Sales – Gross Profit
	=	Rs. 2,00,000 – Rs. 50,000
	=	Rs. 1,50,000

Inventory Turnover Ratio	=	Cost of goods sold
		Average Inventory

5	=	1,50,000
		Average Inventory

Average Inventory	=	Rs. 1,50,000 / 5
	=	Rs. 30,000
Opening Inventory	=	x
Closing Inventory	=	X + Rs. 4,000

Average Inventory	=	Opening Inventory +Closing Inventory
		2

Rs. 30,000	=	X + (X+ Rs. 4,000)
		2

Rs. 60,000	=	2x + Rs. 4,000
2x	=	Rs. 60,000 – Rs. 4,000
x	=	Rs. 56,000 / 2
x	=	Rs. 28,000
Opening Inventory	=	Rs. 28,000
Closing Inventory	=	Rs. 28,000 + Rs. 4,000
	=	Rs. 32,000