The following information is available for the year ended 31 December X4 for a trader who does not keep proper accouning records:
| Inventories at 1 September X2 | 80,000 |
| Sales for September X2 | 4,400,000 |
| Purchases for September X2 | 400,000 |
| Inventory in good condition at 30 September X2 | 36,000 |
Gross profit percentage on sales =90.
Based on this information, what was the value of th inventory lost?
Suggested solutions:
Since Profit margin is 90 %, Cost of Sales will be 10 % of sales
Cost of Sale = Sale X (1 - gross profit margin)
= 4,400,000 X 0.1
= 440,000
Opening inventory + purchase - closing inventory =Cost of Sales
Closing inventory =opening inventory + purchase -Cost of Sales
=80,000 + 400,000 -440,000 = 40,000
| Computed Inventories at 30 September X2 | 40,000 |
| Inventory in good condition at 30 September X2 | 36,000 |
| Inventory Lost for September X2 | 4,000 |
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