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MGT101 GDB 1 Solution Fall 2022

MGT101 GDB 1 Solution Fall 2022: Today we are sharing with you the management subject gdb mgt101 please before creating your assignment or gdb file read all the instructions carefully and follow the rules. To understand the basic concepts of accounting and the application of Double Entry Bookkeeping System.

GDB Question:

ABC Brothers have an opening inventory of Rs.7,000 and a closing inventory of Rs.8,000. Purchases for the year were Rs.90,000, carriage inward was Rs.5,000 and carriage outward was Rs.4,500. ABC Brothers sold some items of inventory for Rs.2,000 in cash during the year, which was purchased for Rs.2,500. The owners of business brought an additional capital of Rs.8,000 during the year and withdrew goods of Rs. 3,000 from the business for his private use. At the end of the year profit reported in income statement is Rs. 72,000. Owner’s equity at the beginning of the period was Rs.100,000.

What will be the:

  • Cost of goods sold.
  • Owners equity at the end of the year.
  • Effect of sale of inventory on assets (Just mention the effect as: Increase in asset by Rs.??? or Decrease in asset by Rs.??? or No Effect on asset).
  • Effect of sale of inventory on owners equity of business (Just mention the effect as: Increase in owners equity by Rs.??? or Decrease in owners equity by Rs.??? or No Effect on owners equity). Note: only the effect of sale of inventory on owners equity is required in this part. Effect of given net profit of Rs. 72,000 on owners equity is not required.

Solution

Cost of Goods Sold

Opening Inventory

7,000

Purchases                (Add)

90,000

Carriage Inward    (Add)

5,000

Closing Inventory  (Less)

8,000

Cost of Goods Sold

94,000

 

Owner Equity

Opening Owner's equity

100,000

Additional Capital   (Add)

8,000

Retained Earnings   (Add)

72,000

Drawings                   (Less)

3,000

Owner Equity

177,000

 

Effect of sale of Inventory on Assets: The assets that we have decreased,  this is the case given to us above, according to the calculation that we have sold out the inventory. Sold some items of Inventory Rs, 2000 in cash and which was purchased for Rs, 2500.

Effect of sale of Inventory on Equity: Our equity will also decrease because our items were worth 2500 and we sold them for 2000, so there has been a loss of Rs, 500. If we have profit, then we add it in the form of retained earnings, if we have loss, then we show it and the loss is minus from owner's equity.

 

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