SOLUTION
Sales = 2,00,000
Gross Profit = 25% on Sales
∴ Gross Profit = 2,00,000 × 25 / 100
= 50,000
Cost of Goods Sold = Total Sales − Gross Profit
= 2,00,000 − 50,000
= 1,50,000
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
5 = 1,50,000 / Average Inventory
Average Inventory = 30,000
Let Opening Inventory = x
Closing Inventory = x + 4,000
Average Inventory = Opening Inventory + Closing Inventory / 2
30,000 = (x + x + 4,000) / 2
or, 60,000 = 2x + 4,000
or, x = 28,000
Opening Inventory = x = Rs 28,000
Closing Inventory = x + 4,000
= 28,000 + 4,000
= Rs 32,000