Question

Your accounts receivable clerk, Mitra Adams, to whom you pay a salary of \(1,500 per month, has just purchased a new Acura. You decide to test the accuracy of the accounts receivable balance of \)82,000 as shown in the ledger.

The following information is available for your first year in business.

(1) Collection from customer $198,000.

(2) Merchandise purchased 320,000.

(3) Ending merchandise inventory by 90,000.

(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 the account.

Short answer

The actual balance of receivables is equal to $124,000.

Step-by-step solution

Definition of Cost of Goods Sold

Cost of goods sold is a line item determining the cost incurred for converting goods from raw material to finished goods that the company sells. It is reported in the income statement.

Determination of actual balance

Particular	Amount $
Merchandise purchased	$320,000
Less: Ending merchandise inventory	(90,000)
Cost of goods sold	230,000
Sales value (140% of $230,000)	322,000
Less: Collection from customers	(198,000)
Ending balance of receivables	$124,000

Difference

Particular	Amount $
Uncollected balance	$124,000
Less: Balance as per ledger	(82,000)
Apparent shortage	$42,000