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

A fire destroyed the stock of Sharma Brothers. Stock at the last balance sheet date was ₹4,00,000; purchases till the fire ₹12,00,000; sales ₹15,00,000 including goods sold at invoice price ₹1,00,000 not yet delivered (stock still in godown, cost ₹80,000, which is part of the stock destroyed). Gross profit is 20% on sales. What is the total stock at the time of fire (before salvage)?

Total stock at the time of fire is ₹4,80,000. Undelivered goods are excluded from sales, so delivered sales are ₹14,00,000 and cost of sales is 80%, ₹11,20,000. Opening stock plus purchases of ₹16,00,000 less this cost leaves ₹4,80,000.

  1. A₹4,00,000
  2. B₹4,80,000Correct
  3. C₹3,20,000
  4. D₹5,20,000

Explanation

Sales 15,00,000 less undelivered 1,00,000 gives delivered sales 14,00,000; COGS = 80% = 11,20,000. Stock = 4,00,000 + 12,00,000 - 11,20,000 = 4,80,000. This already includes the undelivered goods lying in the godown at cost.

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