As the manager of the accounts receivable department for Katrin Leather Goods, Ltd., you recently noticed that Simmy Santos, your accounts receivable clerk who is paid P12,000 per month, has been wearing unusually tasteful and expensive clothing (this is Katrin's first year in business). This morning, Santos drove up to work in a brand new Vios.

Naturally suspicious by nature, you decide to test the accuracy of the accounts receivable balance of P1,320,000 as shown in the ledger. The following information is available for your first year (precisely 9 months ended September 30, 20x7) in business

1. Collection from customers = 1,980,000
2. Merchandise purchased = 3,600,000
3. Ending merchandise inventory = 900,000
4. Goods are marked to sell at 40% above cost

Required:

1. Assuming all sales were made on account, compute the ending accounts receivable balance that should appear in the ledger, noting any apparent shortage. (5 points)
2. Draft a memo dated on October 3, 20x7 to Jay Corales, the branch manager, explaining the facts in this situation. Remember that this problem is serious and you do not want to make hasty accusations. The following criteria will be used in grading the draft memo: (15 points)