Disputed MCQs ... can anyone solve this?

faisal_ali · 10-14-2009, 07:40 AM

1. The following information provided by a company.

Sales for the year $500,000
Puchases at cost $450,000
Closing stock, at selling price $50,000

there was no opening stock.

What was the gross profit for the year?

A $80,000
B $90,000
C $90,909
D $110,000

2. A company has creditors of $80,000 and the payment period is 30 days.
The company's budget for the comming year provides for an increase in creditors of 50% and the payment period taken will increase to 60 days. What will be the budgeted creditors' total at the end of next year?

A $120,000
B $160,000
C $240,000
D $320,000

ausmanpk2001 · 10-14-2009, 04:17 PM

The second question gives out a lot of information but it seems to ask only for the amount of creditors despite giving out itself that there would be 50% increase in the creditors. If my above understanding of the question's requirement is correct, than

The answer is Current creditors = Rs. 80,000
Add = Rs. 40,000 (50% of 80,0000)
Year End Creditors = Rs. 120,000

Or if you go the other way around i.e. assume that total purchases increased by 50 % than the answer is same as above

creditors period = year end creditors / purchases * 365 days

30 days = 80,000 /purchases * 365 days
purchases = 80,000 /30 * 365 days

973,334 = 120,000/60 days *356 days

For next year Purchases = Rs. 973,334 * 150% = Rs. 1,460,001

1,460,001 = year end /30 * 365 days

1,460,001 * 30 /365 = 120,000

ausmanpk2001 · 10-14-2009, 04:26 PM

First question is a bit confusing. It is giving purchases at cost price & closing stock at selling price.

Both of the above figures should be values using a single system. Thats really a disputed question. I'm not sure which figures to use in the formula or how to calculate the appropriate figures.

faisal_desperado · 10-14-2009, 04:45 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by faisal_ali
 1. The following information provided by a company.

Sales for the year $500,000
Puchases at cost $450,000
Closing stock, at selling price $50,000

there was no opening stock.

What was the gross profit for the year?

A $80,000
B $90,000
C $90,909
D $110,000

2. A company has creditors of $80,000 and the payment period is 30 days.
The company's budget for the comming year provides for an increase in creditors of 50% and the payment period taken will increase to 60 days. What will be the budgeted creditors' total at the end of next year?

A $120,000
B $160,000
C $240,000
D $320,000
<hr height="1" noshade id="quote"></blockquote id="quote">

Dear,

For first MCQ, see below, i.e. posted by faizicapri.

Answer of 2nd MCQ is C i.e. 240,000.
It may be calculated using various tactics, including the following.
((80,000 * 150%)/30)*60

Regards,

Faisal

faisal_desperado · 10-14-2009, 04:54 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by ausmanpk2001
 The second question gives out a lot of information but it seems to ask only for the amount of creditors despite giving out itself that there would be 50% increase in the creditors. If my above understanding of the question's requirement is correct, than

The answer is Current creditors = Rs. 80,000
Add = Rs. 40,000 (50% of 80,0000)
Year End Creditors = Rs. 120,000

Or if you go the other way around i.e. assume that total purchases increased by 50 % than the answer is same as above

creditors period = year end creditors / purchases * 365 days

30 days = 80,000 /purchases * 365 days
purchases = 80,000 /30 * 365 days

973,334 = 120,000/60 days *356 days

For next year Purchases = Rs. 973,334 * 150% = Rs. 1,460,001

1,460,001 = year end /30 * 365 days

1,460,001 * 30 /365 = 120,000
<hr height="1" noshade id="quote"></blockquote id="quote">

Dear Usman,
30 days credit period is to be replaced by 60 days, if there remain 80,000 per 30 days as outstanding against creditor then after 50% increase, creditors will be 120,000, regardless of purchases.

If, for 30 days, creditor are 120,000 then for sixty days, it would be 240,000.

Also, in your above calculation, replace 30 days with 60 days, it would be 240,000 i.e. 1460001*60/365 = 240,000

Regards,

faizicapri · 10-14-2009, 07:55 PM

the answer of the 1st MCQ is C
C 90909
It is worked out as follows
since there is no opening stock we can easily calculate sales to purchase ratio i.e 550000/450000 = 1.2222222
now we can compute the closing stock cost as follows
50000/1.2222222 = 40909
now compute COGS i.e purchase - closing stock
450000-40909 = 409091 COGS
G.P = SALES - COGS
= 500000-409091
GROSS PROFIT= 90909

REGARDS,
Muhammad Faizan Pasha
PIPFA QUALIFIED

faisal_desperado · 10-14-2009, 08:05 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by faizicapri
 the answer of the 1st MCQ is C
C 90909
It is worked out as follows
since there is no opening stock we can easily calculate sales to purchase ratio i.e 550000/450000 = 1.2222222
now we can compute the closing stock cost as follows
50000/1.2222222 = 40909
now compute COGS i.e purchase - closing stock
450000-40909 = 409091 COGS
G.P = SALES - COGS
= 500000-409091
GROSS PROFIT= 90909

REGARDS,
Muhammad Faizan Pasha
PIPFA QUALIFIED

<hr height="1" noshade id="quote"></blockquote id="quote">

Correctly replied

Keep it up !

Regards,

faisal_ali · 10-15-2009, 06:48 AM

As Salam O Alaikum,
Thanks to all you people who answred these mcqs....
240,000 was the answer as per my book but i was uable to calculate that, but thanks to u poeple one more time....
May Allah fulfil all your Duas...
Aameen

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by faisal_desperado
 <blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by ausmanpk2001
 The second question gives out a lot of information but it seems to ask only for the amount of creditors despite giving out itself that there would be 50% increase in the creditors. If my above understanding of the question's requirement is correct, than

The answer is Current creditors = Rs. 80,000
Add = Rs. 40,000 (50% of 80,0000)
Year End Creditors = Rs. 120,000

Or if you go the other way around i.e. assume that total purchases increased by 50 % than the answer is same as above

creditors period = year end creditors / purchases * 365 days

30 days = 80,000 /purchases * 365 days
purchases = 80,000 /30 * 365 days

973,334 = 120,000/60 days *356 days

For next year Purchases = Rs. 973,334 * 150% = Rs. 1,460,001

1,460,001 = year end /30 * 365 days

1,460,001 * 30 /365 = 120,000
<hr height="1" noshade id="quote"></blockquote id="quote">

Dear Usman,
30 days credit period is to be replaced by 60 days, if there remain 80,000 per 30 days as outstanding against creditor then after 50% increase, creditors will be 120,000, regardless of purchases.

If, for 30 days, creditor are 120,000 then for sixty days, it would be 240,000.

Also, in your above calculation, replace 30 days with 60 days, it would be 240,000 i.e. 1460001*60/365 = 240,000

Regards,
<hr height="1" noshade id="quote"></blockquote id="quote">

faizicapri · 10-15-2009, 06:56 PM

@faisal_ali

you are most welcome brother
just keep us remember in ur prayers!!

regards,
MUHAMMAD FAIZAN PASHA

ausmanpk2001 · 10-16-2009, 03:28 AM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by faisal_desperado
 <blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by ausmanpk2001
 The second question gives out a lot of information but it seems to ask only for the amount of creditors despite giving out itself that there would be 50% increase in the creditors. If my above understanding of the question's requirement is correct, than

The answer is Current creditors = Rs. 80,000
Add = Rs. 40,000 (50% of 80,0000)
Year End Creditors = Rs. 120,000

Or if you go the other way around i.e. assume that total purchases increased by 50 % than the answer is same as above

creditors period = year end creditors / purchases * 365 days

30 days = 80,000 /purchases * 365 days
purchases = 80,000 /30 * 365 days

973,334 = 120,000/60 days *356 days

For next year Purchases = Rs. 973,334 * 150% = Rs. 1,460,001

1,460,001 = year end /30 * 365 days

1,460,001 * 30 /365 = 120,000
<hr height="1" noshade id="quote"></blockquote id="quote">

Dear Usman,
30 days credit period is to be replaced by 60 days, if there remain 80,000 per 30 days as outstanding against creditor then after 50% increase, creditors will be 120,000, regardless of purchases.

If, for 30 days, creditor are 120,000 then for sixty days, it would be 240,000.

Also, in your above calculation, replace 30 days with 60 days, it would be 240,000 i.e. 1460001*60/365 = 240,000

Regards,
<hr height="1" noshade id="quote"></blockquote id="quote">

You are right, thankyou very much. I guess its been a long time since I've studied management accounting