Answer to Question #319765 in Accounting for ASHVINI KUMAR

Question

From the given information

Amount in Lakhs

cost of goods sold 580

opening stock 40

closing stock 70

creditors at the beginning of the year 60

creditors at the end of the year 100

cash purchases 45

Original cost of equipment sold 400

Gain on the equipment sold 50

Accumulated depreciation on the equipment 80

Calculate:

a. Total purchases, credit purchases and payment to creditors (5 Marks)

b. Define the term Net book value, Accumulated depreciation calculate the net book value

and cash proceeds from sale of investment (5 Marks)

Answer 1

a)

Total purchases= closing stock- Opening stock +cost of goods sold

70-40+580= 610

Credit purchases= creditor closing balance+ cash paid- opening creditor balance

= 100+45- 60= 85

Payment to creditor

= Cost of goods sold+ increase in inventor- increase in accounts payable

580+ 30-40= 570

b)

Net book value- is the amount at which an organization records an asset in its accounting records.

Accumulated depreciation is the cumulative depreciation of an asset up to a single point in its life.

NBV= 400-80= 320

Gain from sale=Cash proceeds(X)- cost- accumulated depreciation

50= X- 400-80

50= X- 320

X= 370