Byfort Company reports the following in its financial statements:
$$\begin{array} { | l | c | c | }
\hline & \underline { 2005 } & \underline { 2006 } \
\hline \text { Accounts Receivable, net } & \$ 34,289 \mathrm {~K} & \$ 29,678 \mathrm {~K} \
\hline \text { Net sales } & \$ 360,007 \mathrm {~K} & \$ 450,000 \mathrm {~K} \
\hline
\end{array}$$ *All sales are on credit.
-How much did the company collect in cash from debtors during 2006?
A) $445,389K
B) $454,611K
C) $484,289K
D) $488,900K

Question

Byfort Company reports the following in its financial statements:
 $$\begin{array} { | l | c | c | } 
\hline & \underline { 2005 } & \underline { 2006 } \
\hline \text { Accounts Receivable, net } & \$ 34,289 \mathrm {~K} & \$ 29,678 \mathrm {~K} \
\hline \text { Net sales } & \$ 360,007 \mathrm {~K} & \$ 450,000 \mathrm {~K} \
\hline
\end{array}$$ *All sales are on credit.
-How much did the company collect in cash from debtors during 2006?
A) $445,389K
B) $454,611K
C) $484,289K
D) $488,900K

Quizplus · Accepted Answer

The company collected cash from debtors during 2006 can be calculated using the following formula:
Cash collected = Net Sales - Change in Accounts Receivable
Change in Accounts Receivable = Accounts Receivable in 2005 - Accounts Receivable in 2006

Change in Accounts Receivable = $34,289K - $29,678K = $4,611K

Cash collected = $450,000K - $4,611K = $445,389K

Therefore, the best choice is B.

Byfort Company Reports the Following in Its Financial Statements *All Sales Are on Credit