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Goods of the sale price of Rs.8000 were sent to a customer on sale or return basis. Till the end of the year the goods were neither returned nor approved. The profit is 25% on cost. The inventory with customer to be included to the closing inventory of the trader will be
  • a)
    6,400
  • b)
    6,000 
  • c)
    7,000
  • d)
    6,500
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
Goods of the sale price of Rs.8000 were sent to a customer on sale or ...
Calculation of Cost Price
- Profit is 25% on the cost price
- Let the cost price be x
- Selling price = cost price + profit
- Selling price = x + 0.25x
- Selling price = 1.25x
- Selling price = Rs.8000
- 1.25x = Rs.8000
- x = Rs.6400

Calculation of Closing Inventory
- Since the goods were neither returned nor approved, they are considered as sold
- Cost of goods sold = cost price of goods sold = Rs.6400
- The inventory with the customer is included in the closing inventory of the trader
- Closing inventory = cost of goods available for sale - cost of goods sold
- Cost of goods available for sale = cost of goods sold + cost of inventory with customer
- Cost of goods available for sale = Rs.6400 + Rs.8000 = Rs.14400
- Closing inventory = Rs.14400 - Rs.6400 = Rs.8000
- However, since the goods with the customer are still not returned or approved, they are not included in the closing inventory
- Therefore, the closing inventory = Rs.6400

Answer: Option A (Rs.6400)
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Community Answer
Goods of the sale price of Rs.8000 were sent to a customer on sale or ...
Total sales amount is 8000 which includes 25% profit so calculation is as simple
8000*100 /125 =6400
because they have asked what is the closing inventory of trader
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Goods of the sale price of Rs.8000 were sent to a customer on sale or return basis. Till the end of the year the goods were neither returned nor approved. The profit is 25% on cost. The inventory with customer to be included to the closing inventory of the trader will bea)6,400b)6,000c)7,000d)6,500Correct answer is option 'A'. Can you explain this answer?
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