Q:
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’s
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 $192,000 as shown in the ledger. The following information is available for your first year
(precisely 9 months ended September 30, 2012) in business.
(1) Collections from customers $188,000
(2) Merchandise purchased 360,000
m
er as
(3) Ending merchandise inventory 90,000
co
eH w
(4) Goods are marked to sell at 40% above cost.
Instructions
o.
rs e
Assuming all sales were made on account, compute the ending accounts receivable balance that
ou urc
should appear in the ledger, noting any apparent shortage. Then, draft a memo dated October 3,
2012, to Mark Price, the branch manager, explaining the facts in this situation. Remember that
o
this problem is serious, and you do not want to make hasty accusations.
aC s
vi y re
A:
ed d
ar stu
To: Mark Price, Branch Manager
sh is
From:Accounting Major
Th
Date: October 3, 2012
Subject:Discrepancy in the Accounts Receivable Account
https://www.coursehero.com/file/15830294/Paper-209-4/
While performing a routine test on accounts receivable balances today, I discovered a $2,000
shortage. I believe that this matter deserves your immediate attention.
To compute the shortage, I determined that the accounts receivable balance should have been
based on the amount of inventory which has been sold. When we opened for business this year,
we purchased $360,000 worth of merchandise inventory, and this morning, the balance in this
account was $90,000.
The $270,000 difference plus the 40% markup indicates that sales on account totaled $378,000
[$270,000 + ($270,000 X .40)] to date. I subtracted the payments of $188,000 made on account
m
er as
this year and calculated the ending balance to be $190,000. However, the ledger shows a balance
co
eH w
of $192,000.
o.
rs e
I realize that this situation is very sensitive and that we should not accuse any one individual
ou urc
without further evidence. However, in order to protect the company’s assets, we must begin an
immediate investigation of this disparity.
o
aC s
vi y re
Aside from me, the only other employee who has access to the accounts receivable ledger is
Kelly Collins, the receivables clerk. I will supervise Collins more closely in the future but
suggest that we also employ an auditor to check into this situation.
ed d
ar stu
sh is
Th
https://www.coursehero.com/file/15830294/Paper-209-4/
Powered by TCPDF (www.tcpdf.org)
