Please help- past papers

agatha

Hi
I hope someone can help me with question 1.6 from past papers- December 2005.
"On 31 October 2005, closing stock was valued at selling price at £22,750 excluding VAT. The mark-up on these goods is 40%. Calculate the closing stock figure for inclusing in the trial balance"
I do know that Mark up= GP/COS (Sales= 140%, COS= 100% and GP= 40%) but I cant get the answer right:crying: I checked at the back and all i am finding is 22,750/ 1.4= 16,250
I would be grateful for explanation
thanks
A

Lou-a-Mondo

Hi
I make it 22,750/100 then times by 40 to give the mark up of 9100. Then you subtract this from the 22,750 to make a closing stock of 13,650.
Does that sound right? I haven't got back as far as 2005 papers yet.

Bluewednesday

You are on the right lines if mark up on cost is 40% then the selling price is 140% as you said.

100% is the cost, so divide the selling price 22750 by 140 to get 1% which is 162.5.

To get 100% you then multiply that by 100 which is 16,250.

Essentially its the same calculation just explained a different way.

agatha

the right anwser is 16,250 but i dont understand why?
i didnt go as far as 2005 i have started with 2005:laugh: thats the first paper i found after coming from work :001_smile:

Bluewednesday

Do you understand it after my explanation? I'm not sure if our replies crossed in posting!

agatha

you opened my eyes! i didnt read the question properly, havent clicked that 22,750 IS a SELLING PRICE, thanks a lot, now it looks so easy
A

agatha

:001_smile:they did cross in posting

Lou-a-Mondo

Hi
I am working in reverse from 2007, typical me!

The closing stock figure must be the lower of cost and net realisable value that is why the closing stock figure is at cost (selling price minus the 40% mark up)