During 2015, Zuma Company had $150,000 in cash sales and $1,240,000 in credit sales. The accounts receivable balances were $180,000 and $215,000 at December 31, 2014 and 2015, respectively. Using the direct method of reporting cash flows from operating activities, what was the total cash collected from all customers during 2015?

Question

Quizplus · Accepted Answer

Using the direct method, cash collected from customers is calculated as:

Cash sales + Cash collected from accounts receivable from credit sales - Increase in accounts receivable

Cash collected from accounts receivable from credit sales can be calculated as follows:

Accounts receivable at December 31, 2015 - Accounts receivable at December 31, 2014
= $215,000 - $180,000
= $35,000

Therefore, cash collected from customers is:

$150,000 + $35,000 - ($215,000 - $180,000)
= $150,000 + $35,000 - $35,000
= $150,000

Total cash collected from all customers during 2015 was $1,355,000 ($150,000 cash sales + $1,205,000 collected from credit sales). Thus, the correct answer is D.

During 2015, Zuma Company Had $150,000 in Cash Sales and $1,240,000