Question 86:
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.
Answer:
|
Sales |
= 4,00,000 |
|
Gross Profit |
= 1,00,000 |
|
Cost of Goods Sold |
= Sales − Gross Profit = 4,00,000 − 1,00,000 = 3,00,000 |
|
Let Opening Inventory |
= x |
|
Closing Inventory |
= x + 40,000 |
|
1,20,000 |
= x + 40,000 |
|
x |
= 80,000 |
|
Opening Inventory |
= 80,000 |
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.
Answer:
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)
|
Average Stock
|
= Opening Stock + Closing Stock/2 =1,60,000+2,00,000/2=1,80,000 |
|
|
|
|
Stock turnover ratio |
= Cost of Goods sold / Average Stock |
|
|
=7,20,000/1,80,000 |
|
|
= 4 Times |
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.
Answer:
|
Inventory turnover ratio |
= Cost of Goods sold / Average Inventory |
|
8 |
=2,00,000/ Average Inventory |
|
Average Inventory |
= 25,000 |
Let Opening Inventory = x
Closing Inventory = 1.5 × x = 1.5 x
|
Average Inventory |
= Opening Inventory + Closing Inventory /2 |
|
25,000 |
= x+1.5 x / 2 |
|
Or, 2.5x |
=50,000 |
|
Or, x |
=20,000 |
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:
|
Particulars |
2015-16 (`) |
2016-17 (`) |
|
Inventory on 31st March Revenue from Operations (Gross Profit is 25% on Cost of Revenue from Operations) |
7,00,000 50,00,000 |
17,00,000 75,00,000 |
In the year 2015-16, inventory increased by `2,00,000. (Delhi and Al 2018)
Answer:
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.
Answer:
Cost of Goods Sold = Opening Stock + Purchases + Closing Stock
= 40,000 + 3,20,000 − 1,20,000 = 2,40,000
|
Average Stock
|
= Opening Stock + Closing Stock/2 =40,000+1,20,000/2=80,000 |
|
|
|
|
Stock turnover ratio |
= Cost of Goods sold / Average Stock |
|
|
=2,40,000/80,000 |
|
|
=3 Times |
(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.
Ts Grewal Solution 2024-2025
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Class 12 / Volume – III
Chapter 3 – Accounting Ratio