The following information is from the books of Auntie Justie, who sells books, for the year ended 31/12/15 Le sales 220,000 stock 1/1/05 60,000 purchases 18...
Question 1 Report
The following information is from the books of Auntie Justie, who sells books, for the year ended 31/12/15
| Le | |
| sales | 220,000 |
| stock 1/1/05 | 60,000 |
| purchases | 180,000 |
| stock 31/12/05 | 70,000 |
| salaries and wages | 8,000 |
| Debtors | 16,000 |
| Transport | 6,000 |
| Rent | 5,000 |
Calculate (showing all workings) the: (a) gross profit (b) average stock (c) net profit
Answer Details
Auntie Justie - year ended 31/12/15
| Item | Le |
|---|---|
| Sales | 220,000 |
| Stock 1/1 (opening) | 60,000 |
| Purchases | 180,000 |
| Stock 31/12 (closing) | 70,000 |
| Salaries and wages | 8,000 |
| Transport | 6,000 |
| Rent | 5,000 |
(a) Gross profit
Cost of goods sold = Opening stock + Purchases - Closing stock
= 60,000 + 180,000 - 70,000 = Le170,000
Gross profit = Sales - Cost of goods sold = 220,000 - 170,000 = Le50,000
(b) Average stock
= (Opening stock + Closing stock) / 2 = (60,000 + 70,000) / 2 = Le65,000
(c) Net profit
Total expenses = Salaries and wages + Transport + Rent = 8,000 + 6,000 + 5,000 = Le19,000
(Debtors of 16,000 is an asset, not an expense, so it is excluded.)
Net profit = Gross profit - Total expenses = 50,000 - 19,000 = Le31,000
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