Fitness Machines reported cash sales of $50,000, credit sales of $800,000 and bad debt expense of $150,000 for last year. Accounts receivable had a balance of $1,000,000 at the beginning of the year and $1,250,000 at the end of the year. Assuming there are no write-offs during the year, how much cash was collected from customers during the year?

Question

Quizplus · Accepted Answer

To calculate the cash collected from customers, we start with the total sales (cash sales + credit sales) and then adjust for the change in accounts receivable. Total sales = $50,000 (cash sales) + $800,000 (credit sales) = $850,000. The accounts receivable increased by $250,000 ($1,250,000 - $1,000,000), which means not all credit sales were collected in cash. Therefore, cash collected = Total sales - Increase in accounts receivable = $850,000 - $250,000 = $600,000.

Fitness Machines Reported Cash Sales of $50,000, Credit Sales of $800,000