As the manager of the accounts receivable department for Beavis Leather Goods, Ltd., you recently noticed that Kelly Collins, your accounts receivable clerk who is paid 1,200 per month, has been wearing unusually tasteful and expensive clothing. (This is Beavis' first year in business) This morning, Collins drove up to work in a brand new Lexus.
Naturally suspicious by nature, you decide to test the accuracy of the accounts receivable balance of $132,000 as shown in the ledger. The following information is available for your first year (precisely 9 months ended September 30, 2010) in business.
1. Collections from customers $188,000
2. Merchandise purchased $360,000
3. Ending merchandise inventory $ 90,000
4. Goods are marked to sell at 49% above cost.
Instructions:
Assuming all sales were made on account, compute the ending accounts receivable balance that should appear in the ledger, noting any apparent shortage. Then, draft a memo dated October 3, 2010, to Mark Price, the branch manager, explaining the facts of the situation. Remember that his problem is seious, and you do want to make hasty accusations.