ACCA Applied Knowledge · Financial Accounting · Incomplete records
Perrin sells all goods at a uniform mark-up of 50% on cost. A fire destroyed part of the inventory. Opening inventory was $30,000, purchases were $210,000 and sales to the date of the fire were $270,000. Inventory salvaged was valued at $12,000. What was the cost of inventory lost in the fire?
The inventory lost was $48,000 at cost. Cost of sales is $270,000 divided by 1.5, which is $180,000. Inventory before the fire was $30,000 plus $210,000 less $180,000, or $60,000. Deducting the $12,000 salvaged leaves $48,000 lost.
- A$48,000Correct
- B$60,000
- C$18,000
- D$36,000
Explanation
Cost of sales = 270,000 / 1.5 = 180,000. Inventory before fire = 30,000 + 210,000 - 180,000 = 60,000. Less salvaged 12,000 gives loss of 48,000. $60,000 forgets the salvage; $36,000 wrongly uses a 50% margin so cost of sales is 135,000 and inventory is 105,000... not matching, being an arbitrary error.
Did you get it right without looking?
One question tells you little. A timed set on Incomplete records shows your real accuracy, how long you take and where you lose marks.
More Incomplete records questions
- Marlow earns a gross margin of 30% on sales. Cost of sales for the year was $175,000. Operating expenses were $40,000. What was Marlow's pro…
- Rafi's business records show opening inventory $8,000, closing inventory $11,000 and purchases $62,000. Sales were made at a constant mark-u…
- Kiona, a sole trader, does not keep full accounting records. Her opening net assets were $42,000, closing net assets are $55,000, she introd…
- Hana's business sells goods at a constant mark-up of 25% on cost. Opening inventory was $10,000, purchases were $86,000 and sales were $100,…
- Ravi's records show opening trade receivables of $8,400, closing trade receivables of $9,600, cash received from credit customers of $71,000…
- Kest Ltd's receivables ledger control account showed: opening balance $20,000; credit sales $150,000; cash received $138,000; discounts allo…