Your accounts receivable clerk, Mitra Adams, to whom you pay a salary of $1,995

Question

Your accounts receivable clerk, Mitra Adams, to whom you pay a salary of $1,995 per month, has just purchased a new Acura. You decide to test the accuracy of the accounts receivable balance of $109,060 as shown in the ledger. The following information is available for your first year in business. (1) Collections from customers $263,340 (2) Merchandise purchased 425,600 (3) Ending merchandise inventory 119,700 (4) Goods are marked to sell at 40% above cost Compute an estimate of the ending balance of accounts receivable from customers that should appear in the ledger and any apparent shortages. Assume that all sales are made on account.

Explanation / Answer

Solution:

Cost of merchandise sold = Merchandise purchased - Ending inventory = $425,600 - $119,700

= $305,900

Sales on account = Cost of goods sold + Markup = $305,900 + ($305,900 * 40%) = $428,260

Collection from customers = $263,340

Estimated ending balance of accounts receivables that should appear in ledger = Sales on account - Collection from customer

= $428,260 - $263,340 = $164,920

Apparent shortages in accounts receivables = $164,920 - $109,060 = $55,860

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