Question
Sithole Retailers prepares quarterly financial statements, but do not count inventory quarterly.
The following information are provided:
Inventories 1 January 20.24, R33 000
Transactions for the period 1 January 20.24 to 31 March 20.24:
Total of sales journal, R506 000
Total of sales column in the cash receipts journal, R239 400
Total of purchases journal (not purchases column in purchases journal), R287 845
Total of purchases column in the cash payments journal, R98 040
Total of purchases returns journal (not purchases returns column), R18 400
Merchandise invoiced at R402,50 to Sithole Retailers was recognised in the purchases journal on 31 March 20.24. Sithole Retailers received this merchandise only on 2 April 20.24.
Sithole Retailers sold merchandise amounting to R1 150 on 31 March 20.24 and recognised it in the sales journal on the same date. This merchandise should, however, be delivered on 3 April 20.24.
The policy of Sithole Retailers is to maintain a profit of 50% on sales.
Required
Determine the cost of the inventories at 31 March 20.24.
Note: Sithole Retailers and all his suppliers are registered for VAT.
Question 1
SITHOLE RETAILERS
Calculation of closing inventory
Opening inventory
Purchases:
Credit purchases
Cash purchases
Purchases returns
Purchases not received at 31 March 20.1
Goods available for sale
Less: Closing inventory
Cost of sales:
Cost of Credit sales (after deducting sales not delivered)
Cost of Cash sales
The following information are provided:
Inventories 1 January 20.24, R33 000
Transactions for the period 1 January 20.24 to 31 March 20.24:
Total of sales journal, R506 000
Total of sales column in the cash receipts journal, R239 400
Total of purchases journal (not purchases column in purchases journal), R287 845
Total of purchases column in the cash payments journal, R98 040
Total of purchases returns journal (not purchases returns column), R18 400
Merchandise invoiced at R402,50 to Sithole Retailers was recognised in the purchases journal on 31 March 20.24. Sithole Retailers received this merchandise only on 2 April 20.24.
Sithole Retailers sold merchandise amounting to R1 150 on 31 March 20.24 and recognised it in the sales journal on the same date. This merchandise should, however, be delivered on 3 April 20.24.
The policy of Sithole Retailers is to maintain a profit of 50% on sales.
Required
Determine the cost of the inventories at 31 March 20.24.
Note: Sithole Retailers and all his suppliers are registered for VAT.
Question 1
SITHOLE RETAILERS
Calculation of closing inventory
Opening inventory
Purchases:
Credit purchases
Cash purchases
Purchases returns
Purchases not received at 31 March 20.1
Goods available for sale
Less: Closing inventory
Cost of sales:
Cost of Credit sales (after deducting sales not delivered)
Cost of Cash sales
Answers
GPT-4o mini
To calculate the cost of inventories at 31 March 2024 for Sithole Retailers, we will follow through the details provided in your question.
### Step 1: Understand the Information Provided
1. **Opening Inventory (1 January 2024)**: R33,000
2. **Total Sales (sales journal)**: R506,000
3. **Total Cash Sales (cash receipts journal)**: R239,400
4. **Total Purchases**:
- Credit Purchases: R287,845
- Cash Purchases: R98,040
- Purchases Returns: R18,400
- Merchandise invoiced but not yet received: R402.50
5. **Sales Recognized but Not Delivered**: R1,150
6. **Profit Margin Target**: 50%
### Step 2: Calculate Purchases
Total Purchases = Credit Purchases + Cash Purchases - Purchases Returns
- Total Purchases = R287,845 + R98,040 - R18,400
- Total Purchases = R367,485
### Step 3: Add the Purchases Not Yet Received
Merchandise invoiced on 31 March but received on 2 April is R402.50. Thus, this needs to be added to the purchases since it is included in the purchases journal.
**Adjusted Purchases** = R367,485 + R402.50 = R367,887.50
### Step 4: Calculate Goods Available for Sale
Goods Available for Sale = Opening Inventory + Adjusted Purchases
- Goods Available for Sale = R33,000 + R367,887.50
- Goods Available for Sale = R400,887.50
### Step 5: Calculate Cost of Sales
**Calculate Sales Not Delivered**:
Sales Not Delivered = R1,150
**Net Sales** = Total Sales - Sales Not Delivered
- Net Sales = R506,000 - R1,150
- Net Sales = R504,850
Since the policy is to maintain a profit margin of 50%, their cost of goods sold (COGS) can be calculated as follows:
Cost of Sales = Net Sales * (1 - Profit Margin)
- Cost of Sales = R504,850 * (1 - 0.50)
- Cost of Sales = R504,850 * 0.50
- Cost of Sales = R252,425
### Step 6: Calculate Closing Inventory
Closing Inventory = Goods Available for Sale - Cost of Sales
- Closing Inventory = R400,887.50 - R252,425
- Closing Inventory = R148,462.50
### Summary
Thus, the cost of the inventories at 31 March 2024 is **R148,462.50**.
### Final Calculation Table
```
SITHOLE RETAILERS
Calculation of Closing Inventory
Opening inventory: R 33,000
+ Purchases:
Credit Purchases: R 287,845
Cash Purchases: R 98,040
Less: Purchases Returns: (R 18,400)
+ Purchases Not Received (31 March): R 402.50
Total Purchases: R 367,887.50
----------------------------------------------------
Goods Available for Sale: R 400,887.50
Less: Closing inventory: (R 148,462.50)
----------------------------------------------------
Cost of Sales: R 252,425
```
### Step 1: Understand the Information Provided
1. **Opening Inventory (1 January 2024)**: R33,000
2. **Total Sales (sales journal)**: R506,000
3. **Total Cash Sales (cash receipts journal)**: R239,400
4. **Total Purchases**:
- Credit Purchases: R287,845
- Cash Purchases: R98,040
- Purchases Returns: R18,400
- Merchandise invoiced but not yet received: R402.50
5. **Sales Recognized but Not Delivered**: R1,150
6. **Profit Margin Target**: 50%
### Step 2: Calculate Purchases
Total Purchases = Credit Purchases + Cash Purchases - Purchases Returns
- Total Purchases = R287,845 + R98,040 - R18,400
- Total Purchases = R367,485
### Step 3: Add the Purchases Not Yet Received
Merchandise invoiced on 31 March but received on 2 April is R402.50. Thus, this needs to be added to the purchases since it is included in the purchases journal.
**Adjusted Purchases** = R367,485 + R402.50 = R367,887.50
### Step 4: Calculate Goods Available for Sale
Goods Available for Sale = Opening Inventory + Adjusted Purchases
- Goods Available for Sale = R33,000 + R367,887.50
- Goods Available for Sale = R400,887.50
### Step 5: Calculate Cost of Sales
**Calculate Sales Not Delivered**:
Sales Not Delivered = R1,150
**Net Sales** = Total Sales - Sales Not Delivered
- Net Sales = R506,000 - R1,150
- Net Sales = R504,850
Since the policy is to maintain a profit margin of 50%, their cost of goods sold (COGS) can be calculated as follows:
Cost of Sales = Net Sales * (1 - Profit Margin)
- Cost of Sales = R504,850 * (1 - 0.50)
- Cost of Sales = R504,850 * 0.50
- Cost of Sales = R252,425
### Step 6: Calculate Closing Inventory
Closing Inventory = Goods Available for Sale - Cost of Sales
- Closing Inventory = R400,887.50 - R252,425
- Closing Inventory = R148,462.50
### Summary
Thus, the cost of the inventories at 31 March 2024 is **R148,462.50**.
### Final Calculation Table
```
SITHOLE RETAILERS
Calculation of Closing Inventory
Opening inventory: R 33,000
+ Purchases:
Credit Purchases: R 287,845
Cash Purchases: R 98,040
Less: Purchases Returns: (R 18,400)
+ Purchases Not Received (31 March): R 402.50
Total Purchases: R 367,887.50
----------------------------------------------------
Goods Available for Sale: R 400,887.50
Less: Closing inventory: (R 148,462.50)
----------------------------------------------------
Cost of Sales: R 252,425
```