12th | Accounting Ratio | Question No. 86 To 90 | Ts Grewal Solution 2023-2024

Revenue from Operations  `4,00,000; Gross Profit  `1,00,000; Closing Inventory  `1,20,000; Excess of Closing Inventory over Opening Inventory  `40,000. Calculate Inventory Turnover Ratio.

Average Inventory= 80,000+1,20,000/2

Average Inventory= 1,00,000

Cost of Goods Sold = Revenue - Gross Profit

Cost of Goods Sold = 4,00,000 - 1,00,000=3,00,000

Inventory turnover Ratio= Cost of Goods Sold/Average inventory

Inventory turnover Ratio=3,00,000/1,00,000

Inventory turnover Ratio= 3 Times

Question 87:

From the following data, calculate Inventory Turnover Ratio:
Total Sales  `10,00,000; Sales Return  `1,00,000; Gross Profit  `1,80,000; Closing Inventory  `2,00,000; Excess of Closing Inventory over Opening Inventory  `20,000.

Cost of Goods Sold = Net Sales (Sales – Sales Return) – Gross Profit
                               =  ` 10,00,000 –  ` 1,00,000 –  ` 1,80,000

       =  ` 7,20,000

Closing Inventory =  ` 2,00,000
Closing Inventory is  ` 40,000 more than the Opening Inventory

Therefore, Opening Inventory =  ` 1,60,000 ( `2,00,000 – ` 40,000)

Question 88:

 `2,00,000 is the Cost of Revenue from Operations (Cost of Goods Sold), during the year. If Inventory Turnover Ratio is 8 times, calculate inventories at the end of the year. Inventories at the end is 1.5 times that of in the beginning.

Let Opening Inventory = x

Closing Inventory = 1.5 × x = 1.5 x

Opening Inventory = x =  ` 20,000

Closing Inventory = 1.5 x = 20,000 × 1.5 =  ` 30,000

Question 89:

 From the following information obtained from the books of Kundan Ltd., calculate the Inventory Turnover Ratio for the years 2015-16 and 2016-17:

In the year 2015-16, inventory increased by `2,00,000. (Delhi and Al 2018)

It is assumed

Cost =100

Profit=25

Revenue=125

Gross Profit=50,00,000×25/125=10,00,000

Cost of goods sold=50,00,000-10,00,000 =40,00,000

Opening Inventory=7,00,000-2,00,000=5,00,000

Average Inventory=5,00,000+7,00,000/2=6,00,000

Inventory turnover Ratio( 2015-16)= 40,00,000/6,00,000

Inventory turnover Ratio( 2015-16)= 6.67 Time

Gross Profit=75,00,000×25/125=15,00,000

Cost of goods sold=75,00,000-15,00,000 =60,00,000

Average Inventory=7,00,000+17,00,000/2=12,00,000

Inventory turnover Ratio ( 2016-17)= 60,00,000/12,00,000

Inventory turnover Ratio ( 2016-17)= 5 Times

Question 90:

Calculate Inventory Turnover Ratio from the following information:
Opening Inventory  ` 40,000; Purchases  ` 3,20,000; and Closing Inventory  ` 1,20,000.
State, giving reason, which of the following transactions would (i) increase, (ii) decrease, (iii) neither increase nor decrease the Inventory Turnover Ratio:
(a) Sale of goods for  ` 40,000 (Cost  ` 32,000).
(b) increase in the value of Closing Inventory by  ` 40,000.
(c) Goods purchased for  ` 80,000.
(d) Purchases Return  ` 20,000.
(e) goods costing  ` 10,000 withdrawn for personal use.
(f) Goods costing  ` 20,000 distributed as free samples.

Cost of Goods Sold = Opening Stock + Purchases + Closing Stock

= 40,000 + 3,20,000 − 1,20,000 = 2,40,000

(a) Sale of goods for  ` 40,000 (Cost  ` 32,000)- Increase

Reason: This transaction will decrease stock at the end (closing stock). Decrease in closing stock will result increase the proportion of Cost of Goods Sold and decrease in Average Stock

(b) Increase in value of Closing Stock by 40,000- Decrease

Reason: Increase in Closing Stock results decrease in Cost of Goods Sold and increase in Average Stock.

(c) Goods purchased for  ` 80,000- Decrease

Reason: This Transaction increases the amount of Closing Stock. Increase in Closing Stock reduces the proportion of Cost of Goods Sold and Increase in Average Stock.

(d) Purchase Return  ` 20,000- Increase

Reason: It will result decrease in Cost of Goods Sold and Average Stock with same amount.

(e) Goods costing  ` 10,000 withdrawn for personal use- Increase

Reason: Drawing of goods will decrease the amount of Closing Stock and increase in Cost of Goods Sold.

(f) Goods costing  ` 20,000 distributed as free sample- Increase

Reason: Goods distributed as free sample reduces Closing Stock. Reduction in Closing Stock will result increase in Cost of Goods Sold and decrease in Average Stock.