A trader has cost of goods sold of Rs. 320,000 and applies a mark-up of 25% on cost. What are the sales?
Correct answer: A. Rs. 400,000
- A. Rs. 400,000
- B. Rs. 395,000
- C. Rs. 405,000
- D. Rs. 420,000
Explanation
Gross profit is 25% of Rs. 320,000, which is Rs. 80,000. Therefore, sales equal cost of goods sold plus gross profit, or Rs. 400,000. A mark-up on cost is not the same as a profit percentage on sales.
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About Incomplete Records
Incomplete records require profit and financial position to be reconstructed when a complete double-entry system is unavailable. Methods include statements of affairs, capital comparisons, control accounts, cash summaries and margin calculations to find missing sales, purchases, expenses, assets, liabilities and drawings, while distinguishing business profit from changes in capital.
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