Accounting Multiple Choice Question – 5 April 2020

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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Author: stuart001uk2014

Referral marketing, business, economics and accounting s​pecialist & corporate mentor View all posts by stuart001uk2014