I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

PART D: RECORDING TRANSACTIONS AND EVENTS 

 

112

 

Solution

 

Initial calculation of closing inventory values: 

INVENTORY COUNT 

 

At cost 

Realisable value 

Amount written down 

 

$ 

$ 

$ 

Fashion goods 

 2,100 

 400 

 1,700 

Other goods (balancing figure) 

 5,500 

 5,500 

           

 

 7,600 

 5,900 

 1,700 

GROSS PROFIT CALCULATION 

 

 $      

 $       

Sales 

 

 81,400 

Value of opening inventory 

 8,800 

 

Purchases 

 48,000 

 

 

 56,800 

 

Less closing inventory 

   5,900 

 

Cost of goods sold 

 

 50,900 

Gross profit 

 

 30,500 

By using the figure of $5,900 for closing inventories, the cost of goods sold automatically includes the 

inventory written down of $1,700. 

QUESTION 

Gross profit

 

Gross profit for 20X7 can be calculated from: 

A 

Purchases for 20X7, plus inventory at 31 December 20X7, less inventory at 1 January 20X7 

B 

Purchases for 20X7, less inventory at 31 December 20X7, plus inventory at 1 January 20X7 

C 

Cost of goods sold during 20X7, plus sales during 20X7 

D 

Profit for the year for 20X7, plus expenses for 20X7  

ANSWER 

The correct answer is D. Gross profit less expenses = profit for the year. Therefore profit for the year 

plus expenses = gross profit.