Its a good question.
Lets first understand what the question is telling us to do based on the infromation provided.
1. It says that assume a particular price for 2001, the GP is 240,000. If the prices of purchase and sale increase by 20% and 10% respectively, what will be the closing stock.
2. Though it mentions GP for 2001 but not sure if it applies for 2002. Refer point 5 for logic.
3. No where it discloses quantitative information.
4. Thus it is asking us that if the basis of operation is same ie same qty is bought and sold, then what is the value of clsoingh stock.
5. Thus if quantity is a constant in the case, purhcase price and slae price escalation is given, it entails that the GP is not constant.
Logic behind the solution in given example of text book:
1. Assume purhcase price to be 100, and the goods in opening stock to be hundred. Now prepare a trading account of only quantities for 2011.
2. This Qty P&L will remain same because the basis is constant. Thus same amount of qty in op stk, purhcase, sales and closing stk.
3. Arrrive at a Selling price for 2001. It will be 142.86. Considering the increase in 2002 of 10%, it will be 157.14.
4. Now plot the information and you will arrive at the closing stock as balancing number.
|
|
2001 basis |
2002 basis |
particulars |
2001 basis |
2002 basis |
|
to opening stock |
700 |
700 |
by sales |
5600 |
5600 |
|
to purchase |
5000 |
5000 |
by closing stock |
100 |
100 |
|
|
|
|
|
|
|
|
|
5700 |
5700 |
|
5700 |
5700 |
Hope this helps.
CAclubindia
