Question 8
The data below relates to J.K. Limited as at December 31, 2021.
D
Inventory- 1st January 2021 80,000.00
Inventory- 31st December 2021 60,000.00
Purchases 180,000.00
Operating expenses 40,000.00
Discount received 20,000.00
Other current assets 150,000.00
Current liabilities 100,000.00
Calculate:
- Gross profit;
- Net profit;
- Gross profit margin;
- Net profit margin;
- Working capital;
- Rate of inventory turnover.
Observation
Candidates did the (v) part of the question well. However, the (vi) part of the question was poorly done. Some candidates failed to use the correct currency symbol which attracted a penalty. Some candidate could not outline the correct formula of rate of inventory turnover.
The expected responses are:
Ignore i, ii, iii & iv
(v) Working capital = Current assets – Current liabilities
(D150, 000 + D60, 000) – D100, 000
D210, 000 – D100, 000
= D110, 000