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Calculate the value of purchase through following details :
Opening Stock Rs. 20,000
Sales Rs. 1,50,000
Gross profit Margin Rs. 20% of sales 
Closing Stock Rs. 30,000 
  • a)
    Rs. 1,30,000
  • b)
    Rs. 1,40,000
  • c)
    Rs. 1,50,000
  • d)
    Rs. 1,60,000
Correct answer is option 'A'. Can you explain this answer?
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Calculate the value of purchase through following details :Opening Sto...
Calculation of Purchases

To calculate the value of purchases, we need to use the following formula:

Purchases = Opening Stock + Net Purchases - Closing Stock

Where,

Net Purchases = Cost of Goods Sold (COGS) = Sales - Gross Profit Margin

Given,

Opening Stock = Rs. 20,000
Sales = Rs. 1,50,000
Gross profit Margin = 20% of Sales
Closing Stock = Rs. 30,000

Calculation of Gross Profit Margin

Gross Profit Margin = 20% of Sales
= 20/100 * 1,50,000
= Rs. 30,000

Calculation of COGS

COGS = Sales - Gross Profit Margin
= 1,50,000 - 30,000
= Rs. 1,20,000

Calculation of Purchases

Purchases = Opening Stock + Net Purchases - Closing Stock
= 20,000 + 1,20,000 - 30,000
= Rs. 1,10,000

Therefore, the value of purchases is Rs. 1,10,000, which is option 'A'.
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Calculate the value of purchase through following details :Opening Stock Rs. 20,000Sales Rs. 1,50,000Gross profit Margin Rs. 20% of salesClosing Stock Rs. 30,000a)Rs. 1,30,000b)Rs. 1,40,000c)Rs. 1,50,000d)Rs. 1,60,000Correct answer is option 'A'. Can you explain this answer?
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