Question 18 of 22intermediate🔧 ApplyNumerical3 marks

From the information given below you are required to calculate the cash paid for the inventory: Inventory in the beginning Rs. 40,000; Credit Purchases Rs. 1,60,000; Inventory in the end Rs. 38,000; Trade payables in the beginning Rs. 14,000; Trade payables in the end Rs. 14,500.

Correct Answer

Rs. 1,59,500

Exercise: Numerical Questions | Q: 2 | (Page 37)
For More Understanding

Explanation

The calculation involves determining the cash paid to suppliers for credit purchases. Since the problem provides 'Credit Purchases' directly, we adjust this amount for the change in Trade Payables (Creditors) to find the actual cash outflow. The formula used is: Cash Paid = Credit Purchases + Opening Trade Payables - Closing Trade Payables. The inventory figures provided in the question (Opening and Closing Inventory) are not required for this specific calculation as the purchase amount is already given.

Solution Steps

  1. Step 1: Identify the formula for Cash Paid for Inventory (Credit Purchases). Cash Paid = Credit Purchases + Opening Trade Payables - Closing Trade Payables

  2. Step 2: Substitute the given values into the formula. = Rs. 1,60,000 (Credit Purchases) + Rs. 14,000 (Opening Trade Payables) - Rs. 14,500 (Closing Trade Payables)

  3. Step 3: Calculate the final amount. = Rs. 1,74,000 - Rs. 14,500 = Rs. 1,59,500

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