CA Intermediate · Advanced Accounting · Accounting for Branches including Foreign Branches
Pune Traders Ltd. invoices goods to its Jaipur branch at cost plus 25%. During the year goods sent to the branch at invoice price were ₹6,00,000. Under the stock and debtors system, what is the amount of loading (excess of invoice price over cost) included in these goods sent?
The loading is ₹1,20,000. A mark-up of 25% on cost means invoice price is 125% of cost, so loading is one-fifth of the invoice price. One-fifth of ₹6,00,000 equals ₹1,20,000, corresponding to cost of ₹4,80,000.
- A₹1,20,000Correct
- B₹1,50,000
- C₹1,00,000
- D₹4,80,000
Explanation
Cost plus 25% means invoice price = 125% of cost. Loading = 25/125 of invoice price = 1/5 × 6,00,000 = ₹1,20,000. Check: cost = 4,80,000; 25% of that is 1,20,000. Taking 25% of the invoice price gives ₹1,50,000, which wrongly uses invoice price as the base.
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