A company's year end is 31 December. Its inventory count took place on 7 January and valued inventory at cost of $48,300. Between 1 January and 7 January, goods costing $2,700 were received from suppliers and sales of $6,000 were made at a mark-up of 25% on cost. What is the value of inventory at 31 December?

Correct answer: C) $50,400

Explanation

Cost of the goods sold after the year end = $6,000 x 100/125 = $4,800. These were in inventory at 31 December, so they are added back; the goods received after the year end were not, so they are deducted: $48,300 + $4,800 - $2,700 = $50,400. Treating 25% as a margin gives a cost of $4,500 and $50,100, and using the selling price gives $51,600.