Calculating purchases in sole trader accounting

Steps:

• Compute COGS using 50% markup on cost: COGS = revenue / 1.5 = $90,000 / 1.5 =$60,000.
• Adjust for goods withdrawn ($7,000 at cost): total goods used =$60,000 + $7,000 =$67,000.
• Apply inventory equation: opening inventory + purchases = closing inventory + total goods used.
• Solve for purchases: purchases = $67,000 +$20,000 - $80,000 =$7,000.

Why D is correct:

• Not enough information; standard formula yields $7,000 (not an option), suggesting ambiguity in how drawings affect inventory or markup application.

Why the others are wrong:

• A ignores markup and drawings adjustments entirely.
• B misapplies gross margin as 50% of sales for COGS ($45,000), leading to invalid negative purchases.
• C reverses inventory change sign in formula.

Final answer: Not enough information.