CA Intermediate · Advanced Accounting · Accounting for Branches including Foreign Branches
Jaipur Ltd's branch at Udaipur is invoiced goods at cost plus 50%. Branch stock at invoice price: opening Rs 30,000, closing Rs 45,000. Under the stock and debtors system, what is the amount of Stock Reserve required at the end of the year for closing branch stock?
The stock reserve is Rs 15,000, being one-third of the closing stock at invoice price Rs 45,000, because invoice price is cost plus 50%.
- ARs 15,000
- BRs 22,500
- CRs 10,000Correct
- DRs 30,000
Explanation
Invoice price is cost + 50%, so loading is 50/150 = 1/3 of invoice price. Closing stock reserve = 45,000 x 1/3 = 15,000. Option Rs 10,000 is incorrect.
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