Question

8. J.K. Limited data as at December 31, 2021 (Inventory 1 Jan 2021: 80,000; Inventory 31 Dec 2021: 60,000; Purchases: 180,000; Operating expenses: 40,000; Discount received: 20,000; Other current assets: 150,000; Current liabilities: 100,000). Calculate: (i) Gross profit; (ii) Net profit; (iii) Gross profit margin; (iv) Net profit margin; (v) Working capital; (vi) Rate of inventory turnover.

Accepted Answer

Cost of sales = Opening stock + Purchases − Closing stock = 80,000+180,000−60,000 = 200,000.
(i)/(ii)/(iii)/(iv) There is no sufficient information (no sales figure given) to calculate gross profit, net profit, gross profit margin, or net profit margin.
(v) Working capital = current assets − current liabilities = (150,000+60,000) − 100,000 = 110,000.
(vi) Average stock = (opening stock+closing stock)/2 = (80,000+60,000)/2 = 70,000. Rate of inventory turnover = cost of goods sold / average stock = 200,000/70,000 ≈ 2.86 times.

WAEC Commerce 2022 Theory — Question 8

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