ACCA Applied Knowledge · Financial Accounting · Incomplete records
Dalton sells goods at a mark-up of 40% on cost. Sales for the year were $224,000. Opening inventory was $18,000 and closing inventory was $22,000. What were purchases for the year?
Purchases were $164,000. Cost of sales is $224,000 divided by 1.4, which is $160,000. Adding the $4,000 increase in inventory (closing $22,000 less opening $18,000) gives purchases of $164,000.
- A$164,000Correct
- B$156,000
- C$160,000
- D$138,000
Explanation
Cost of sales = 224,000 / 1.4 = 160,000. Purchases = cost of sales + closing inventory - opening inventory = 160,000 + 22,000 - 18,000 = 164,000. $156,000 reverses the inventory adjustment, while $160,000 ignores the inventory movement.
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