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CMA Intermediate · Financial Accounting · Insurance Claim for Loss of Stock and Loss of Profit

A fire at Kapoor Traders destroyed stock on 10 June. Stock at the last balance sheet date was ₹2,00,000. Purchases from 1 April to 10 June were ₹6,00,000, sales were ₹8,00,000, and the normal gross profit rate is 25% on sales. The value of stock lost on the date of fire is:

The stock lost is ₹2,00,000. Cost of goods sold is sales less 25% gross profit, i.e. ₹6,00,000. Adding opening stock ₹2,00,000 to purchases ₹6,00,000 gives goods available of ₹8,00,000, and deducting cost of sales leaves ₹2,00,000.

  1. A₹2,00,000Correct
  2. B₹1,60,000
  3. C₹2,40,000
  4. D₹2,80,000

Explanation

Cost of goods sold = 8,00,000 - 25% of 8,00,000 (2,00,000) = 6,00,000. Stock = opening 2,00,000 + purchases 6,00,000 - COGS 6,00,000 = 2,00,000. Using gross profit on cost wrongly would give a different COGS (6,40,000) and stock of 1,60,000.

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