Last year, Knox Corporation reported on its income statement sales of $375,000 and cost of goods sold of $140,000. During the year, the balance in accounts receivable increased $30,000, the balance in accounts payable decreased $25,000, and the balance in inventory increased $10,000. The company uses the direct method to determine the net cash provided by (used in) operating activities on its statement of cash flows.Under the direct method, sales adjusted to a cash basis would be:
A) $295,000
B) $345,000
C) $405,000
D) $355,000

Question

Quizplus · Accepted Answer

The cash basis sales are calculated by adjusting the reported sales for changes in accounts receivable. Since accounts receivable increased by $30,000, this amount is subtracted from the sales to determine cash collected from customers: $375,000 - $30,000 = $345,000.

Last Year, Knox Corporation Reported on Its Income Statement Sales