Use the information below to Answer questions 46 and 47. Among Limited invoiced goods at a cost of ₦10,000 to its Ikeja branch at a marginal of 20%. The bra...

Use the information below to Answer questions 46 and 47.

Among Limited invoiced goods at a cost of ₦10,000 to its Ikeja branch at a marginal of 20%. The branch later returned goods worth ₦1,200 at invoice price to the head office.

The profit marginal should be?

Answer Details

The profit margin is the percentage of profit earned on a product or service after deducting the cost of producing or acquiring it. In this case, Among Limited invoiced goods at a cost of ₦10,000 to its Ikeja branch at a marginal of 20%. The cost of goods sold to the branch is ₦10,000 and the profit margin is 20%, which means the selling price is 120% of the cost price, which is ₦12,000 (₦10,000 + 20% of ₦10,000). Later, the branch returned goods worth ₦1,200 at invoice price to the head office. This means that the cost of goods returned is ₦1,000 (₦1,200 / 120%). To adjust the branch's inventory and profit, the branch stock adjustment account should be credited for ₦1,000, which reduces the cost of goods sold by that amount, and reduces the profit margin from 20% to a lower amount. Therefore, the answer is: credit to branch stock adjustment account.