Stonehaven Co.reported sales on an accrual basis of £109,000.If accounts receivable increased £31,000, and the allowance for doubtful accounts increased £10,000 after a write-off of £3,000, what amount of cash sales does Stonehaven have?

Question

Quizplus · Accepted Answer

To calculate the amount of cash sales, we need to adjust the accrual sales for the change in accounts receivable. 
Cash sales = Accrual sales - Increase in accounts receivable
Cash sales = £109,000 - £31,000
Cash sales = £78,000

However, this amount includes the allowance for doubtful accounts write-off, which is not related to cash sales. We need to adjust for this by adding back the amount of the write-off.
Cash sales = Cash collected + Allowance for doubtful accounts write-off
£78,000 = Cash collected + (£10,000 - £3,000)
Cash collected = £71,000

Therefore, the amount of cash sales for Stonehaven Co. is £71,000, which is option A.