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# Tiny Company: Compute the balance of accounts receivable

The following information from Tiny Company's first year of operations is to be used in testing the accuracy of Accounts Receivable. The December 31, 2008, balance is \$28,300.

(a) Collections from customers, \$48,000.
(b) Merchandise purchased, \$74,000.
(c) Ending merchandise inventory, \$31,500.
(d) Goods sell at 60% above cost.
(e) All sales are on account.

Compute the balance that Accounts Receivable should show and determine the amount of any shortage or overage.

#### Solution Preview

For your convenience, I have attached a formatted MS Excel spreadsheet containing the text below.

Calculate Cost of Goods Sold (COGS) from the provided information:

Merchandise purchased \$74,000
Ending inventory \$31,500
Cost of Goods sold (COGS) \$42,500

Calculate Sales Revenue, which from the provided information (d) is 60% above COGS
Total Sales Revenue = COGS + .60(COGS)
Total ...

#### Solution Summary

Excel spreadsheet shows how to compute the accounts receivable balance and determine shortages for Tiny Company.

\$2.19