The following information is available for Inverness Ltd.’s second year in business:

• Opening merchandise inventory is $35,000.

• Goods are marked to sell at 35% above cost.

• Merchandise purchased totalled $600,000.

• Collections from customers are $420,000.

• Ending merchandise inventory is $85,000.

• Opening accounts receivable balance is $0.

• Ending accounts receivable balance is $85,000.


a. Estimate the ending accounts receivable that should appear in the ledger. Calculate any shortages, if any. Assume that all sales are made on account.

b. What controls can be put in place to prevent theft?