Sales reported on the income statement totaled $750,000. The beginning balance in accounts receivable was $70,000. The ending balance in accounts receivable was $80,000. Under the direct method of determining the net cash provided by (used in) operating activities on the statement of cash flows, sales adjusted to a cash basis are:
A) $760,000
B) $740,000
C) $680,000
D) $830,000

Question

Quizplus · Accepted Answer

Under the direct method of determining net cash provided by operating activities, adjustments are made to sales to reflect the actual cash received from customers. The beginning balance of accounts receivable is added to sales, and the ending balance of accounts receivable is subtracted from sales to arrive at cash sales.

Cash sales = Sales + Beginning accounts receivable - Ending accounts receivable
Cash sales = $750,000 + $70,000 - $80,000
Cash sales = $740,000

Therefore, the correct answer is B) $740,000.

Sales Reported on the Income Statement Totaled $750,000