Question 77 Chapter 4 of +2-B – T.S. Grewal 12 Class

Question 77 Chapter 4 of +2-B

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

 

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
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

 

 

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)

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

2 Book 3 min 225x300 - Question 77 Chapter 4 of +2-B  - T.S. Grewal 12 Class
T.S. Grewal’s Analysis of Financial Statements

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