Accounts preparation 1 closing inventory journal

Toby82Toby82 Just JoinedPosts: 6Registered
Hi,

Ive got my Accounts preparation 1 exam tomorrow and there is one question on the practice papers which i cannot seem to get my head around!

Its a journal entry for the closing inventory - statement of financial position & closing inventory of profit & loss:

The question is - No entries have been made for closing inventory as at 31st March 07. It has been valued at a sales price of £17820. The sales of goods is always 20% higher than the cost of those goods sold.

The way i worked it out was 17820 x 20% = 3564. I then took the 3564 from the 17820 = 14256.

Looking at the answer they have it as 14850 and i have no idea how they got that amount. Its really starting to annoy me now as its probably something really simple I'm doing wrong.

Also is the exam from Accounts preparation 1 pretty much like the practice papers on the AAT website? I did level 2 last year and all the exams pretty much mirrored the practice paper in layout and types of questions asked. Just wondering if its the same for level 3.

Comments

  • PhillipPPhillipP Settling In Nicely Posts: 20Registered
    Cost of goods x 1.2 = Sales price £17820

    Therefore £17820 / 1.2 = Cost of goods

    £17820 / 1.2 = £14850
  • CeeJaySixCeeJaySix Well-Known Posts: 645Registered
    What Phillip said. You have to remember that the way the question is worded, £17,820 is 120% of the CoS; CoS is NOT 80% of the sale price. This differentiation will be relevant more and more as you progress, so worth getting your head round it now.
  • j1994j1994 Posts: 106Registered
    Help with this question closing inventory has been valued at 19420 .sales price of goods is set at 25% higher than cost of goods sold? The answer is 15536
  • CeeJaySixCeeJaySix Well-Known Posts: 645Registered
    This is a mark-up - the increase is based on the cost of sale, rather than the sales price.

    As the mark up is 25%, the £19,420 is 125% of the cost of sale. To get back to the original cost of sale, x 100/125 (or divide by 125 and multiply by 100, if it helps you follow it more logically).
    j1994
  • j1994j1994 Posts: 106Registered
    Thankyou :-D
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