Question

9 A company sells goods at a mark-up of 25%. The following information was available at the end of the financial year. goods in warehouse goods sent on sale or return $300 000 (cost) $200 000 (at invoice price) What was the value of closing inventory in the financial statements? A $300 000 B $450 000 $460 000 D $500 000 10 X started a business 3 years ago and now has a capital of $175000. Over that period his profits have been $73000 and his drawings $52000. In year 2 he introduced cash of $35 000 and in year 3 he took out of the business, for his own use, a non-current asset with a net book value of $4000. How much capital did he start the business with? A $67000 B $115000 C $123000 D $158 000

Answer 1

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Answer 9
In case of sale or return transaction sale will be confirmed only if the buyer approved it, or pays money or shows evidence that he will buy it.
In the present case its not mentioned so inventory on sale or return basis will also be included in closing inventory.
Invoice price	200,000.00
Mark up	25%
Cost price	160,000.00
So ending inventory will be:
Cost price of sale or return inventory			160,000.00
Add: goods in warehouse			300,000.00
Ending inventory			460,000.00	Option C
Answer 10
Current balance in capital			175,000.00
Add: Drawings			52,000.00
Add: non current assets withdrawn in year 3			4,000.00
Less: Profits			73,000.00
Less: cash introduced in year 2			35,000.00
Business started with capital of			123,000.00	Option C