The owner of a trading company engaged your services as auditor. There is a discrepancy between the companys income and the sales volume. The owner suspects that the staff is committing theft. You are to determine whether or not this is true. Your investigation revealed the following: 1. Physical inventory, taken December 31, 2019 under your observation, showed that cost was P26,500 and market value, P25,000. The inventory of January 1, 2019 showed cost of P39,000 and market value of P37,500. It is the firms practice to value inventory at lower of cost or market. Any loss between cost and market value is included in Other Expenses. 2. The average gross profit rate was 40% of net sales. 3. The Accounts Receivable as of January 1, 2019 were P13,500. During 2019, Accounts Receivable written off during the year amounted to P1,000. Accounts Receivable as of December 31, 2019 were P37,500. 4. Outstanding purchase invoices amounted to P50,000 at the end of 2019. At the beginning of 2019 they were P37,500. 5. Receipts from customers during 2019 amounted to P300,000. 6. Disbursements to merchandise creditors amounted to P200,000. Compute the following: A. Total Sales for 2019. B. Total purchases for 2019. C. Amount of inventory shortage, if any.
The owner of a trading company engaged your services as auditor. There is a discrepancy between the companys income and the sales volume. The owner suspects that the staff is committing theft. You are to determine whether or not this is true. Your investigation revealed the following:
1. Physical inventory, taken December 31, 2019 under your observation, showed that cost was P26,500 and market value, P25,000. The inventory of January 1, 2019 showed cost of P39,000 and market value of P37,500. It is the firms practice to value inventory at lower of cost or market. Any loss between cost and market value is included in Other Expenses.
2. The average gross profit rate was 40% of net sales.
3. The
4. Outstanding purchase invoices amounted to P50,000 at the end of 2019. At the beginning of 2019 they were P37,500.
5. Receipts from customers during 2019 amounted to P300,000.
6. Disbursements to merchandise creditors amounted to P200,000.
Compute the following:
A. Total Sales for 2019.
B. Total purchases for 2019.
C. Amount of inventory shortage, if any.
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