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ACCA Applied Skills · Financial Reporting · Preparation of single entity financial statements

A fire destroyed part of Yusuf Ltd's inventory records. Opening inventory was $25,000, purchases to the date of the fire were $95,000, and sales were $140,000. Yusuf earns a gross margin of 30% on sales. What was the inventory at cost at the date of the fire?

Inventory at the date of the fire was $22,000. Cost of sales is 70% of $140,000, which is $98,000, and deducting this from goods available of $120,000 leaves the inventory.

  1. A$22,000
  2. B$25,000Correct
  3. C$42,000
  4. D$98,000

Explanation

Gross profit = 30% x 140,000 = 42,000, so cost of sales = 98,000. Inventory = 25,000 + 95,000 - 98,000 = $22,000. Hence the correct option is $22,000; $98,000 is just cost of sales and $42,000 is the gross profit.

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