AAT Practice Test 1 Q1.2 ON Cost of goods sold
GJM
Registered Posts: 15
Hi everyone
I have my FAPR exam on Monday morning and am really hoping someone can explain to me where I am going wrong on the following question.
The question is 1.2 of the first practice assessment available on the AAT website:
Task 1.2
You are a trainee accounting technician who prepares final accounts for a number of sole trader clients.
You have the following information about a business for its year ended 31 March 20X7:
(i) Calculate the cost of goods sold for the year ended 31 March 20X7
(II) Calculate the value of the closing inventory
Model solution answers (no workings provided for either) are:
(i) £48,675
(ii) £4,765
My attempts
(i) cost of sales = (sales/100+margin)100
so, cost of sales = (64,900/125)100 = £51,920
(ii) closing inventory = purchases + opening inventory  cost of sales
so, closing inventory = £48,390 + £5,050  £51,920 = £1,520
When these were wrong, I thought maybe I was missing a key difference between cost of sales and cost of goods sold but the only formula I can find in my textbook or online for cost of goods sold is: cost of goods sold = opening inventory + purchases  closing inventory, but the question asks you to find closing inventory in part (ii), so I am assuming it doesn't expect you to use it in (i).
I cannot find an alternative formula and just cannot figure out where I am going wrong. Please can someone explain to me what I am missing on this question?
It is worth 9 marks so I am keen to figure it out.
Thanks in advance
Grace
I have my FAPR exam on Monday morning and am really hoping someone can explain to me where I am going wrong on the following question.
The question is 1.2 of the first practice assessment available on the AAT website:
Task 1.2
You are a trainee accounting technician who prepares final accounts for a number of sole trader clients.
You have the following information about a business for its year ended 31 March 20X7:
 It is not registered for VAT.
 The trader operates with a gross sales margin of 25%.
 Inventory at 1 April 20X6 was £5,050.
 Sales of £64,900 were made.
 Purchases were recorded as £48,390.
(i) Calculate the cost of goods sold for the year ended 31 March 20X7
(II) Calculate the value of the closing inventory
Model solution answers (no workings provided for either) are:
(i) £48,675
(ii) £4,765
My attempts
(i) cost of sales = (sales/100+margin)100
so, cost of sales = (64,900/125)100 = £51,920
(ii) closing inventory = purchases + opening inventory  cost of sales
so, closing inventory = £48,390 + £5,050  £51,920 = £1,520
When these were wrong, I thought maybe I was missing a key difference between cost of sales and cost of goods sold but the only formula I can find in my textbook or online for cost of goods sold is: cost of goods sold = opening inventory + purchases  closing inventory, but the question asks you to find closing inventory in part (ii), so I am assuming it doesn't expect you to use it in (i).
I cannot find an alternative formula and just cannot figure out where I am going wrong. Please can someone explain to me what I am missing on this question?
It is worth 9 marks so I am keen to figure it out.
Thanks in advance
Grace
0
Comments

I'm afraid you have mixed up margin and markup
cost of sales = (sales/100+margin)100
should be
cost of sales = (sales/100+markup)100
The formula you need is
cost of sales = sales (100  margin)/100
But this is better dealt with in stages
Profit = 25% x 64,900 = £16,225
Cost of sales = 64,900  16,225 = £48,675
Yes, cost of sales and cost of goods sold are the same.
1 
Thank you so much, Peter!0

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