Exercise 7-4 Your accouscivable clerk, Mitra Adams, to whom you pay a salary of

Question

Exercise 7-4 Your accouscivable clerk, Mitra Adams, to whom you pay a salary of $2,985 per month, has just purchased a new Acura. You decide to test the accuracy of the accounts receivable balance of $163,180 as shown in the ledger. The following information is available for your first year in business. (1) (2) (3) (4) Collections from customers Merchandise purchased Ending merchandise inventory Goods are marked to sell at 40% above cost $394,020 636,800 179,100 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. The ending balance of accounts receivable from customers Apparent shortage LINK TO TEXT

Explanation / Answer

a)cost of goods sold= merchandise purchased-ending inventory
=636800-179100=457700
Selling price=1.4*cost of goods sold
=1.4*457700=640780
Shortage=sales-collections-balance as per ledger
=640780-394020-163180=83580
Ending balance=640780-394020=246760
shortage=83580

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