The data below is the sales of MGM Co. The accountant of the company has provided you with the following data as well as his computed balance of P2,350,000 as the gross sales of the company. As the external auditor of the firm, you are tasked to compute whether the gross sales presented to you is understated or overstated as compared to your audited amount. How much is the understatement or overstatement? Below is the data provided by a company regarding its receipts and disbursements.31-Dec1-JanAccounts Receivable225,000215,000Notes Receivable100,000120,000Accounts Payable130,000110,000Notes PayablePrepaid Insurance180,000270,00040,00025,000Cash Sales480,000Collections of A/R net of 40,000 discounts1,500,000Collections of nots receivable90,000Bank ban- 1 year. Dated Dec 3190,000Puchase returns and alow ances50,000Cash Purchases130,000Payments of A/P net of 15,000 discountsPayments of Notes Payable1,400,000300,000Insurance200,000Other Expenses620,000Sales Retums and Allowances55,000

Gross sales are the Total sales before adjusting for any discounts, sales returns and allowances.…

Answered: As the external auditor of the firm,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The data below is the sales of MGM Co. The accountant of the company has provided you with the following data as well as his computed balance of P2,350,000 as the gross sales of the company. As the external auditor of the firm, you are tasked to compute whether the gross sales presented to you is understated or overstated as compared to your audited amount. How much is the understatement or overstatement?

Below is the data provided by a company regarding its receipts and disbursements.
31-Dec
1-Jan
Accounts Receivable
225,000
215,000
Notes Receivable
100,000
120,000
Accounts Payable
130,000
110,000
Notes Payable
Prepaid Insurance
180,000
270,000
40,000
25,000
Cash Sales
480,000
Collections of A/R net of 40,000 discounts
1,500,000
Collections of nots receivable
90,000
Bank ban- 1 year. Dated Dec 31
90,000
Puchase returns and alow ances
50,000
Cash Purchases
130,000
Payments of A/P net of 15,000 discounts
Payments of Notes Payable
1,400,000
300,000
Insurance
200,000
Other Expenses
620,000
Sales Retums and Allowances
55,000

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