Q:

Your accounts receivable clerk, Mary Herman, to whom you pay a salary of $1,500 per month,
has just purchased a new Audi. You decided to test the accuracy of the accounts receivable
balance of $117,000 as shown in the ledger.
The following information is available for your first year in business.
(1) Collections from customers $198,000
(2) Merchandise purchased 320,000
(3) Ending merchandise inventory 70,000
(4) Goods are marked to sell at 40% above cost
Instructions
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.

A:

Computation of cost of goods sold:

Merchandise purchased.................................................... $320,000
Less: Ending inventory................................................... 70,000
Cost of goods sold...................................................................... $250,000

Selling price = 1.4 (Cost of good sold)

= 1.4 ($250,000)
= $350,000

Sales on account............................... $350,000

Less: Collections............................. 198,000
Uncollected balance......................... 152,000
Balance per ledger............................ 117,000

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 Apparent shortage............................ $ 35,000—Enough for a new car

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