Accounting Multiple Choice Question – 5 April 2020

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

At the end of its most recent financial year, a firm, which sells exclusively on credit, was owed £60,000 by its debtors. The firm applies a mark-up of 25% on all goods and allows its debtors 60 days credit (based on 360 days in the firm’s financial year).

Its gross profit for the year was?

Select ONE answer:

  1. £72,000
  2. £90,000
  3. £122,000
  4. £180,000

 

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

  1. Correct – Days credit given = (Debtors / Credit sales) * 360. Therefore 60 = (£60,000 / Credit sales) * 360. Therefore, Credit sales = £360,000. Cost + 25% = £360,000. Therefore, Cost = £288,000. Gross profit = Sales – Cost of sales = £360,000 – £288,000 = £72,000
  2. Not correct
  3. Not correct
  4. Not correct

 

 

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