Bello Hardware Stores keeps single-entry accounting records. On 31st December 2025, a burg… — JAMB UTME

Bello Hardware Stores keeps single-entry accounting records. On 31st December 2025, a burglary occurred at the storehouse. The following financial details were extracted from the business records for the year 2025:

- Opening inventory (1st January 2025): $\text{₦}75,000$
- Total purchases: $\text{��}410,000$
- Carriage inwards: $\text{₦}25,000$
- Returns outwards: $\text{₦}15,000$
- Total sales revenue: $\text{₦}480,000$
- Goods withdrawn by proprietor for personal use (at cost): $\text{₦}12,000$
- Goods destroyed by rainwater prior to the theft (at cost): $\text{₦}18,000$
- Undamaged stock remaining after the burglary: $\text{₦}33,000$

If the business sells all goods at a uniform mark-up of $25\%$ on cost, what is the cost value of the stock stolen during the burglary?

₦48,000Answer
B
₦72,000
C
₦28,000
D
₦108,000

Answer

The cost value of the stolen stock is ₦48,000.

To find the stolen stock value, first convert the 25% (1/4) mark-up on cost to a 20% (1/5) margin on sales. Calculate Cost of Goods Sold as 80% of sales revenue (₦480,000 × 0.80 = ₦384,000). Next, find net purchases (₦410,000 + ₦25,000 - ₦15,000 = ₦420,000) and adjust total available goods by subtracting non-sale reductions at cost (₦75,000 + ₦420,000 - ₦12,000 - ₦18,000 = ₦465,000). Subtract COGS from available goods to get expected closing inventory of ₦81,000. Finally, deduct undamaged stock (₦33,000) from expected closing inventory to arrive at the stolen stock cost of ₦48,000.

Step-by-Step Solution

Calculate Net Purchases

Net Purchases = ₦410,000 + ₦25,000 - ₦15,000 = ₦420,000

Carriage inwards adds to purchase cost while returns outwards reduce total purchases.

Calculate total goods available for sale before loss and drawings

Adjusted Goods Available = ₦75,000 (Opening Stock) + ₦420,000 (Net Purchases) - ₦12,000 (Drawings) - ₦18,000 (Water Loss) = ₦465,000

Goods withdrawn by the owner and goods destroyed prior to theft must be removed from stock available for normal sales at cost.

Convert mark-up to margin to determine Cost of Goods Sold (COGS)

Margin = Mark-up / (1 + Mark-up) = (1/4) / (1 + 1/4) = 1/5 or 20%. COGS = Sales × (1 - Margin) = ₦480,000 × (1 - 0.20) = ₦384,000

Mark-up is based on cost while margin is based on selling price. A 25% (1/4) mark-up equals a 20% (1/5) profit margin on sales revenue.

Calculate expected closing stock before theft

Expected Closing Stock = Goods Available (₦465,000) - COGS (₦384,000) = ₦81,000

Expected closing inventory represents the cost of goods that should be remaining in the store.

Calculate stolen stock value

Stolen Stock = Expected Closing Stock (₦81,000) - Undamaged Stock (₦33,000) = ₦48,000

The difference between expected inventory and actual physical stock recovered equals the stolen stock.

Key Concept

Conversion of mark-up to margin to estimate cost of goods sold and missing stock under single-entry systems.

Estimated Time:3m 0s

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