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-The cost of goods sold is £40,000. Opening inventory is £5,000, closing inventory is £10,000. Carriage out is £1,000, carriage in is £2.00 and purchase returns are £3,000. What are the purchases?

Question

The following information should be used to answer questions 
 
-The cost of goods sold is £40,000. Opening inventory is £5,000, closing inventory is £10,000. Carriage out is £1,000, carriage in is £2.00 and purchase returns are £3,000. What are the purchases?

Quizplus · Accepted Answer

The formula to calculate purchases is: Purchases = Cost of Goods Sold + Closing Inventory - Opening Inventory + Purchase Returns - Carriage In. Plugging in the given values: Purchases = £40,000 + £10,000 - £5,000 + £3,000 - £2 = £48,000. However, the correct calculation should not subtract Carriage In, as it is a part of the cost to bring inventory to its current location and condition. Therefore, the correct calculation is: Purchases = £40,000 + £10,000 - £5,000 + £3,000 = £48,000, which is not an option. The mistake was in subtracting Carriage In, which should not be subtracted. The correct formula for calculating purchases in this context is: Purchases = Cost of Goods Sold + Closing Inventory - Opening Inventory + Purchase Returns. Therefore, the correct calculation is: Purchases = £40,000 + £10,000 - £5,000 + £3,000 = £48,000. Given the options and the correction, none of the provided choices accurately reflect the correct calculation based on the standard formula. The correct answer should be £48,000 based on the information provided, but this was mistakenly not considered in the initial explanation. The correct approach to find the purchases without considering Carriage In (since it's a part of purchasing costs but not directly affecting the calculation of purchases here) would indeed result in a calculation error in the provided options. The initial explanation mistakenly included Carriage In in the calculation.

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