Thomas Ltd uses the direct method to prepare its cash flow statement.Refer to the following information reported for the year 2016: Sales revenue,$41,000
Interest revenue,$700
Accounts receivable,beginning balance,$13,500
Accounts receivable,ending balance,$26,000
There were no amounts reported for Interest receivable.
In the operating activities section of the cash flow statement,what amount will be shown for total cash receipts?
A)$13,500
B)$54,500
C)$29,200
D)$26,000

Question

Quizplus · Accepted Answer

Under the direct method, cash received from customers is calculated as Sales revenue + Decrease in accounts receivable - Increase in accounts receivable. Therefore, cash receipts for Thomas Ltd will be calculated as follows:

Sales revenue $41,000
Add: Decrease in accounts receivable $13,500 - $26,000 = $12,500
Total cash receipts $53,500
Less: Interest revenue $700
Cash receipts from operating activities $52,800

Therefore, the correct answer is C) $29,200, which is the cash received from customers.

Thomas Ltd Uses the Direct Method to Prepare Its Cash