12th | Accounting Ratio | Question No. 141 To 145 | Ts Grewal Solution 2023-2024

Question 141;

A trader carries an average Inventory of one `1,00,000. His Inventory turnover Ratio is 8 times; He Sells goods at a profit of 25% of cost. Calculate Gross Profit Ratio

Answer:

Gross profit ratio = gross profit upon revenue from operations ×100

Gross profit ratio = 2,00,000/1,00,0000 ×100 = 20%

Cost of revenue from operation = average inventory × inventory turnover ratio

Cost of revenue from operation = 1,00,000 × 8 = 8,00,000

Gross profit = 25% of 8,00,000 = 2,00,000

Revenue from operation = cost of revenue from operations + gross profit

Revenue from operation = 8,00,000 +2,00,000 = 10,00,000

Question 142:

Calculate Gross Profit Ratio from the following data:
Average Inventory `3,20,000; Inventory Turnover Ratio 8 Times; Average Trade Receivables `4,00,000; Trade Receivables Turnover Ratio 6 Times; Cash Sales 25% of Net Sales.

Answer:

Inventory Turnover Ratio = 8 times
Average Inventory = ` 3,20,000

Cost of Goods sold = 25,60,000
Trade Receivables Turnover Ratio = 6 times
Average Trade Receivables = ` 4,00,000

Stock turnover ratio= Cost of Goods sold/ Average Stock = Cost of Goods sold/3,20,000=8 Times

Net Credit Sales = 24,00,000
Total Sales = Cash Sales + Credit Sales
Total Sales = 25% of Total Sales + Credit Sales
75% of Total Sales = 24,00,000
Trade Receivables Turnover Ratio = Net Credit Sales/ Average Trade Receivables=

6= Net Credit Sales/4,00,000

Gross Profit = Total Sales – Cost of Goods Sold
= 32,00,000 – 25,60,000 = 6,40,000
Total Sales= Gross Profit×100/ Net Sales

= 6,40,000/32,00,000×100=20%

Question 143:

(i) Revenue from Operations: Cash Sales `4,20,000; Credit Sales `6,00,000; Return `20,000. Cost of Revenue from Operations or Cost of Goods Sold `8,00,000. Calculate Gross Profit Ratio.
(ii) Average Inventory `1,60,000; Inventory Turnover Ratio is 6 Times; Selling Price 25% above cost. Calculate Gross Profit Ratio.
(iii) Opening Inventory `1,00,000; Closing Inventory `60,000; Inventory Turnover Ratio 8 Times; Selling Price 25% above cost. Calculate Gross Profit Ratio.

Answer:

(i)

Net Sales= Cash Sales+ Credit Sales- Sales Return

=4,20,000+6,00,000-20,000=10,00,000

Cost of Goods Sold = 8,00,000

Gross Profit= Net Sales- Cost of Goods Sold

=10,00,000-8,00,000=2,00,000

Gross Profit Ratio.= Gross Profit/ Net Sales×100

=2,00,000/10,00,000×100=20%

(ii) Average Stock = 1,60,000

Stock Turnover Ratio = 6 Times

Stock turnover ratio= Cost of Goods sold/ Average Stock

8 = Cost of Goods sold/3,20,000

Cost of Goods sold=9,60,000

Gross Profit = 25% on Cost

Gross Profit =25/100×9,60,000=2,40,000

Net Sales= Cost of Goods sold +Gross Profit

Gross Profit Ratio.= Gross Profit/ Net Sales×100

=2,40,000/12,00,000×100=20%

(iii) Opening Inventory = 1,00,000

Closing Inventory = 60,000

Average Inventory= Opening Inventory /Closing Inventory

Inventory turnover ratio= Cost of Goods sold/ Average Inventory

Gross Profit = 25% on Cost

Gross profit=25/100×6,40,000=1,60,000

Net Sales= Cost of Goods sold +Gross Profit

=6,40,000+1,60,000=8,00,000

Gross Profit Ratio = Gross Profit/ Net Sales × 100

= 1,60,000/8,00,000× 100 = 20%

Question 144: Gross Profit Ratio of a company is 25%. State, giving reason, which of the following transactions will (a) increase or (b) decrease or (c) not alter the Gross Profit Ratio:

(i) Purchases of Stock-in-Trade 50,000.

(ii) Purchases Return 15,000.

(iii) Cash Sale of Stock-in-Trade 40,000.

(iv) Stock-in-Trade costing 20,000 withdrawn for personal use.

(v) Stock-in-Trade costing 15,000 distributed as free sample.

Answer:

Transactions	Effect on Operating Profit Ratio	Reason
(i)	No Change	Both Purchases and Closing Inventory will increase by the same amount, therefore, Cost of Revenue from operations will remain unchanged.
(ii)	No Change	Both Purchases and Closing Inventory will decrease by the same amount, therefore, Cost of Revenue from Operations will remain unchanged.
(iii)	No Change	Revenue from Operations will increase but Closing Inventory will decrease by the same percentage (Not by same amount). As a result, Cost of Revenue from Operations will increase by the same percentage as the Revenue from Operations increases.
(iv)	No Change	Both Purchases and losing Inventory will decrease by the same amount, therefore, Cost of Revenue from Operations will not change.
(v)	No Change	Cost of Revenue from Operations is not affected as purchases is reduced by Rs. 15,000 and indirect expenses (Sample Expenses A/c) increases.