Reference no: EM132865896
Question - AUDIT OF RECEIVABLES - Today, you are task to audit Gumamela Company. As per your observation, your client has not prepared the financial statements for 2018, 2019 and 2020. During this period, no accounts have been written off as uncollectible, and the rate of gross profit on sales has remained constant for each of the three years.
Before January 1, 2018, the client used the accrual method of accounting. Starting January 1, 2018 to December 31, 2020, only cash receipts and disbursements records were maintained. When sales on account were made, they were entered in the subsidiary accounts receivable ledger. No general ledger postings have been made since December 31, 2017.
As a result of your examination, the correct data shown in the table below are available
12/31/2017 12/31/2020
Accounts receivable balances:
Less than one year old 15,400 28,200
One to two years old 1,200 1,800
Two to three years old 800
Over three years old 3,300
Total accounts receivable 16,600 34,100
Inventories 11,600 18,800
Accounts payable for inventory purchased 5,000 15,300
Cash received on accounts receivable in: 2018 2019 2020
Applied to:
Current year collections 148,800 161,800 208,800
Accounts of the prior year 14,300 15,000 18,600
Accounts of two years prior 600 400 2,000
Total 163,700 177,200 229,400
Cash sales 17,000 26,000 32,100
Cash disbursements for inventory purchased 152,000 114,200 137,800
Requirements -
a. Compute for the company's sales for the three-year period.
b. Compute for the aggregate amount of purchases for the three-year period.
c. Compute for the company's gross profit ratio.
d. Compute for the company's gross profit for 2018, 2019 and 2020.