O Level Accounting (7707)•7707/12/M/J/21
Explanation
Insufficient data to determine correct inventory turnover Steps:
- Calculate recorded COGS: opening inventory 2800 - closing inventory 4000.
- Gross profit = sales - COGS; correct gross profit is 1200.
- Average inventory requires correct opening and closing values; error likely in closing inventory, but amount unknown without sales or recorded gross profit.
- Inventory turnover = correct COGS / average inventory; cannot compute without sales to adjust for error.
Why the correct option is correct:
- Not applicable; no option fits due to missing sales figure needed to find error in records and correct COGS.
Why the others are wrong:
- A, B, C, D: All assume resolvable data, but sales or error magnitude absent, preventing accurate turnover calculation.
Final answer: Not enough information.
Topic: Calculation and understanding of accounting ratios
Practice more O Level Accounting (7707) questions on mMCQ.me