Question 77 Chapter 4 of +2-B
Interest Coverage Ratio
77. Calculate Inventory Turnover Ratio in each of the following alternative
cases:
Case 1: Cash Sales 25% of Credit Sales; Credit Sales 3,00,000; Gross Profit
20% on Revenue from Operations, i.e., Net Sales; Closing Inventory 1,60,000; Opening Inventory 40,000.
Case 2: Cash Sales 20% of Total Sales; Credit Sales 4,50,000; Gross Profit
25% on Cost; Opening Inventory 37,500; Closing Inventory 1,12,500.
The solution of Question 77 Chapter 4 of +2-B: –
Case I:
| Credit Sales | = | Rs. 3,00,000 |
| Cash Sales | = | @25% of Credit Sales |
| = | Rs. 3,00,000 x 25% | |
| Cash Sales | = | Rs. 75,000 |
| Total Sales | = | Cash Sales + Credit Sales |
| = | Rs. 3,00,000 + Rs. 75,000 | |
| = | Rs. 3,75,000 | |
| Gross Profit | = | Rs. 3,75,000 x 20% |
| = | Rs. 75,000 | |
| Cost of Goods Sold | = | Total Sales – Gross Profit |
| = | Rs. 3,75,000 – Rs. 75,000 | |
| = | Rs. 3,00,000 |
| Inventory Turnover Ratio | = | Opening Inventory + Closing Inventory |
| Average Inventory |
| Inventory Turnover Ratio | = | Rs. 40,000 + Rs. 1,60,000 |
| 2 | ||
| = | Rs. 1,00,000 |
| Inventory Turnover Ratio | = | Cost of Goods Sold |
| Average Inventory |
| Inventory Turnover Ratio | = | Rs. 3,00,000 |
| Rs. 1,00,000 | ||
| = | 3 Times |
Case II:
| Total Sales | = | X |
| Cash Sales | = | X x 20/100 |
| Cash Sales | = | 20x/100 |
| Total Sales | = | Cash Sales + Credit Sales |
| X | = | 20x | +Rs.4,50,000 |
| 100 |
| 100x | = | 20x + Rs. 4,50,00,000 |
| 100x – 20x | = | Rs. 4,50,00,000 |
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| X | = | Rs. 4,50,00,000 |
| 80 | ||
| x | = | Rs. 5,62,500 |
Cost of Goods Sold = y
| Gross Profit | = | Y X | 25 |
| 100 |
| = | 25y | |
| 100 |
| 25y | = | Rs. 5,62,500 – y |
| 100 |
| Y+ | 25y | = | Rs. 5,62,500 |
| 100 |
| 125y | = | Rs. 5,62,500 |
| 100 |
Advertisement-Y
| Y | = | Rs. 5,62,00,000 |
| 125 | ||
| Y | = | Rs. 4,50,000 |
Cost of Goods Sold = Rs. 4,50,000
| Average Inventory | = | Opening Inventory + Closing Inventory |
| 2 |
| Average Inventory | = | Rs. 37,500 + Rs. 1,12,500 |
| 2 | ||
| = | Rs. 75,000 |
| Inventory Turnover Ratio | = | Cost of Goods Sold |
| Average Inventory |
| Inventory Turnover Ratio | = | Rs. 4,50,00 |
| Rs. 75,000 | ||
| = | 6 Times |
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Balance Sheet: Meaning, Format & Examples
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Also, Check out the solved question of previous Chapters: –
T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)
- Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
- Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
- Chapter No. 3 – Goodwill: Nature and Valuation
- Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
- Chapter No. 5 – Admission of a Partner
- Chapter No. 6 – Retirement/Death of a Partner
- Chapter No. 7 – Dissolution of a Partnership Firm
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
- Chapter No. 4 – Accounting Ratios
- Chapter No. 5 – Cash Flow Statement
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
