Determine the year''s purchase from the following information relating to a firm. Total creditor''s b/f N 7,200 Total cash payment to suppliers N 98,800 Tot...
Determine the year''s purchase from the following information relating to a firm.
Total creditor''s b/f N 7,200
Total cash payment to suppliers N 98,800
Total creditors c/f N 8,400
Answer Details
The year's purchase is the ratio of the total credit purchases to the average creditors. To calculate the total credit purchases, we need to add the opening creditors balance (creditors b/f) to the purchases made during the year, then subtract the closing creditors balance (creditors c/f).
Using the information provided, we can calculate the total credit purchases as follows:
Total credit purchases = Creditors b/f + Purchases - Creditors c/f
Total credit purchases = 7,200 + Purchases - 8,400
Total credit purchases = Purchases - 1,200
We do not have the purchases figure, but we can calculate it by adding the total cash payment to suppliers to the total credit purchases:
Total credit purchases + Total cash payment to suppliers = Total purchases
Purchases - 1,200 + 98,800 = Purchases + 97,600
97,600 = 1,200 + Purchases
Purchases = 96,400
Now we can calculate the year's purchase by dividing the total credit purchases by the average creditors:
Year's purchase = Total credit purchases / Average creditors
Average creditors = (Creditors b/f + Creditors c/f) / 2
Average creditors = (7,200 + 8,400) / 2
Average creditors = 7,800
Year's purchase = 96,400 / 7,800
Year's purchase = 12.359
Rounding off to the nearest whole number, the year's purchase is 12.
Therefore, the answer is: ₦100,000