Sai Baba made sales of N10,000 having computed his gross profit % to sales to be 20. His opening stock was N250 and ending stock is N200. Calculate his purchases.

A. N7950
B. N8050
C. N7050
D. N8950

Correct Answer:

Option A – N7950

Explanation

The gross profit percentage of sales would be
20% x N 10,000 = N 2000

If cost of sales + gross profit = N 10,000 = N 2000
:. N 8000 + N 2000 = N 10,000
If cost of goods available for sales less closing stock
= cost of sales
:. N8200 + N200 = N8000

Hence; cost of goods available for sale = opening stock + purchases
:. N8200 = N250 + A
= N 8200 – N 250
=N 7950