Accounts receivable arising from sales to customers amounted to $100,000 and $70,000 at the beginning and end of the year, respectively. Credit sales reported on the income statement for the year were $200,000. Exclusive of the effect of any other adjustments, the cash collected from customers to be reported on a direct method statement of cash flows is:

Question

Business

Louis Watson

2 August, 10:33

Accounts receivable arising from sales to customers amounted to $100,000 and $70,000 at the beginning and end of the year, respectively. Credit sales reported on the income statement for the year were $200,000. Exclusive of the effect of any other adjustments, the cash collected from customers to be reported on a direct method statement of cash flows is:

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Vinnie · Answer 1

The cash collected from customers = $230,000

Explanation:

The cash collected from customers to be reported on a direct method statement of cash flows is = Net sales + decrease in accounts receivable.

or, Net sales - Increase in accounts receivable

Given,

Net sales = $200,000

Beginning accounts receivable = $100,000

Ending accounts receivable = $70,000

Decrease in accounts receivable = $100,000 - $70,000 = $30,000

Putting the values into the formula, we can get

Net sales + decrease in accounts receivable

$200,000 + $30,000 = $230,000

The cash collected from customers = $230,000