In: Accounting
As an audit supervisor in an international public accounting firm, you are in charge of the audit of several firms with 31 March year-ends. The financial statements of these firms are prepared in compliance with U.S GAAP, and are expected to be authorized for issue in early June 2017. Your audit juniors on the job have approached you for advice on the following case:
Auto Arrow (AA) does not maintain a proper accounting system. A main bulk of its existing source documents were destroyed in a fire. Based on available records and contacts with its customers and also with reference to its 2015/2016 financial statements, it managed to provide the following information for the 2016/2017 financial year:
Balance at 1 April 2016 |
Balance at 31 March 2017 |
|
Accounts Receivable |
$500,000 |
$520,000 |
Allowance for Doubtful Accounts |
$60,000 |
$80,000 |
A additional information
The accountant is unsure of how to determine the gross sales revenue for the year. Assume all sales are on credit.
Required: Determine the gross sales revenue for the financial year 2016/2017.
Answer
Gross sales | $ 906,000 |
Calculated as following
Account receivable | |||
Beginning balance | $ 500,000 | Cash = $920000-50000 = | $ 870,000 |
Allowances for bad debts(Write off) | $ 10,000 | ||
Sales Revenue (Gross) (balancing figure) | $ 906,000 | Sales return | $ 6,000 |
Ending balance | $ 520,000 | ||
Total | $ 1,406,000 | Total | $ 1,406,000 |
or we can write as
Write off = beginning balance of allowances for bad debts + bad debt expense - ending balance
= $60000+30000-80000
= $10000
Gross sale = Ending balance+cash received+write offs+returns- beginning balance |
Gross sale = $520000+870000+10000+6000-500000 = $906000 |
Hit Thumbs up if satisfied
Have any query mention in comment section please
Thank you