Auditing Problems

Substantive Testing of Accounts Receivable

You are auditing the financial statements of the Zwick Company for the year ended December 31, 2012. Your examination of the accounts receivable proves that the data listed in the work paper below represent typical operations for sales, sales returns, uncollected items, and receivables balances. Cash receipts are applied to the oldest billings. Credit terms are net cash in 60 days.

Account No. Dates (2012) and Transactions Balance Dec. 31, 2012 1 Nov. 15, Ps 6,000 sale; Nov. 25, Ps 1,000 return; Dec. 17, Ps 15,000 sale 20,000 Dr. 2 June 10, Ps 2,000 sale; July 10, Ps 2,000 sale; Aug. 10, Ps 2,000 sale; Aug. 25, Ps 2,000 cash; Sept. 10, Ps 2,000 sale; Sept. 25, Ps 1,000 cash; Nov. 10, Ps 2,000 sale; Dec. 10, Ps 2,000 sale 9,000 Dr. 3 Dec. 20, Ps 6,000 sale; Dec. 31, Ps 14,000 return arising from sale of Nov. 15 8,000 Cr. 4 Oct. 10, Ps 7,000 advance to branch office 7,000 Dr. 5 June 10, Ps 12,000 sale; customer has been paying Ps 1,000 per month 6,000 Dr. 6 Feb. 10, Ps 10,000 sale; Apr. 10, Ps 10,000 cash; July 10, Ps 2,000 allowance for defective goods. Has agreed to send check January 2, 2013. 2,000 Cr. 7 Jan. 4, Ps 1,000 sale; customer totally bankrupt 1,000 Dr. 8 Sept, 5, Ps 12,000 sale; Nov. 12, Ps 11,000 cash 1,000 Dr