Assume that sales are made evenly through the year; accounts receivable are collected one month after sale. Gross profit to sales has been .40. Sales in year 1 are $1,200,000; actual sales increase 10% from year 1 to year 2. Accounts receivable turnover for year 1 was 12.0.

Relationships between accounts for year 2 are expected to be similar to those of year 1. A comparison between year 1 and unaudited year 2 data is as follows: Year1 Year2 (unaudited) Sales S 1,200,000 Can be determined Cost of Goods Sold 720,000 792,000 (amount seems all right) Accounts Receivable (end of year) 100,000 Can be determined Note: At the beginning of year 1, accounts receivable were $100,000. Unaudited data for year 2 indicate the following: Gross profit to sales is .4612244; Accounts receivable turnover is 8.166666 Determine if there seems to be a discrepancy for unaudited Sales for year 2 and Accounts Receivable at the end of year 2. If so, indicate whether it seems a possible overstatement or understatement, and estimate an amount. BRIEFLY DISCUSS AND SHOW CALCULATIONS. Estimate of Year 2 Recorded Sales, [unaudited] (Discuss briefly) Estimate of year 2 Actual Sales [Based on your "audit\"] Expected discrepancy {Discuss briefly} Recorded sales Actual sales