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 | 60,000 |
| Sales for September X2 | 511,111 |
| Purchases for September X2 | 500,000 |
| Inventory in good condition at 30 September X2 | 90,000 |
Gross profit percentage on sales =10.
Based on this information, what was the value of th inventory lost?
Suggested solutions:
Since Profit margin is 10 %, Cost of Sales will be 90 % of sales
Cost of Sale = Sale X (1 - gross profit margin)
= 511,111 X 0.9
= 460,000
Opening inventory + purchase - closing inventory =Cost of Sales
Closing inventory =opening inventory + purchase -Cost of Sales
=60,000 + 500,000 -460,000 = 100,000
| Computed Inventories at 30 September X2 | 100,000 |
| Inventory in good condition at 30 September X2 | 90,000 |
| Inventory Lost for September X2 | 10,000 |
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