The following information relates to a hardware merchant, who is not registered for VAT and who makes all purchases on credit.
at 31 December 1996 at 31 December 1995
Stock: £10,600 £10,300
Debtors: £5,400 £4,800
Creditors: £5,900 £6,300
Transactions during 1996:
- Amount received from debtors £127,600
- Amount paid to creditors £93,200
- Cash sales £23,200
- Discount allowed to debtors £2,400
- Bad debts written off £800
- Increase in provision for doubtful debts £250
- Refunds received from creditors £80
The gross profit earned by the merchant during 1996 was?
Select ONE answer:
- £38,820
- £38,870
- £61,750
- £62,180
Show your workings to arrive at your answer, and explain and justify your reasons:
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This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 4
- Not correct
- Not correct
- Not correct
- Correct
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- Debtors
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- Dr Balance b/d £4,800
Dr Sales £131,400
Dr Totals £136,200-
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- Cr Bank £127,600
Cr Discount Allowed £2,400
Cr Bad Debts £800
Cr Balance b/d £5,400
Cr Total £136,200
- Cr Bank £127,600
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- Total Sales = Cash Sales + Credit Sales = £23,200 + £131,400 = £154,600
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- Creditors
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- Dr Bank £93,200
Dr Balance c/d £5,900-
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- Cr Balance b/d £6,300
Cr bank 80
Cr Purchases credit £92,720
Cr Totals £99,100
- Cr Balance b/d £6,300
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- Cost of Sales = Opening Stock + Purchases – Closing Stock = £10,300 + £92,720 – £10,600 = £92,420
- Gross profit = Sales – Cost of sales = £154,600 – £92,420 = £62,180
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