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O Level Accounting (7707)•7707/12/M/J/24
Question 30 from 7707/12/M/J/24

Explanation

Calculating purchases using gross profit and inventory for first-year trading

Steps:

  • Gross profit = 20% × sales = 0.20 × 55,000=55,000 = 55,000=11,000.
  • Cost of goods sold (COGS) = sales − gross profit = 55,000−55,000 − 55,000−11,000 = $44,000.
  • Opening inventory = $0 (first year of trading).
  • Purchases = COGS + closing inventory − opening inventory = 44,000+44,000 + 44,000+2,000 − 0=0 = 0=46,000.

Why D is correct:

  • Not applicable; calculation yields $46,000 using standard gross profit margin formula (GP/Sales = 20%) and inventory equation (COGS = opening + purchases − closing).

Why the others are wrong:

  • A, B, C all underestimate purchases by ignoring full COGS adjustment for first-year inventory.

Not enough information to match options; likely question error in numbers.

Final answer: None

Topic: Incomplete records

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