Closing Inventory Figure - Where do I get the figure?

Hi, Could anyone help me with the following question please.

No entries have been made for closing inventory as at 31 March 20X7. It has been valued at sales price of £17820. The sales price of goods is always 20% higher than the cost of those goods.

Journal

Closing Inventory - SoFP Dr 14850
Closing Inventory - SoPL Cr 14850

How do I get the figure 14850, I can't work out the sum.

Thank you!
ezradave21

Answers

  • rakeshsuwal
    rakeshsuwal LondonRegistered Posts: 79
    Hi Charlotte, we always use the lowest value closing stock. Here Cost of good sold is lower. As per question COS is 100%, SP is 20% higher so total of 120% and the figure is 17820. We now know the SP in % and in Figure, all we need to do is calculate what is 100%(COS). So, COS = 17820/120*100, which is 14,850. So we choose this figure and forget 17820. If that helps?
  • Adele69
    Adele69 CambridgeAAT Student Posts: 320
    I think I got this one wrong in the practice assessment too, when as the figure is 20% higher like VAT just divide by 1.2 for the lower figure.
  • rakeshsuwal
    rakeshsuwal LondonRegistered Posts: 79
    yes. Just divide my 1.2 for 20%.
  • charlotte_rahman
    charlotte_rahman Registered Posts: 5
    Thank you very much :-)
  • rakeshsuwal
    rakeshsuwal LondonRegistered Posts: 79
    No worries. Happy to help. :)
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