The balance in Accounts Receivable at the beginning of the year amounted to $16,000. During the year, $64,000 of credit sales were made to customers. If the ending balance in Accounts Receivable amounted to $10,000, and uncollectible accounts expense amounted to $4,000, what is the amount of cash inflow from customers that would appear in the operating activities section of the cash flow statement?

Question

Quizplus · Accepted Answer

The cash inflow from customers can be calculated by adding the decrease in Accounts Receivable to the credit sales made during the year.

Credit sales = $64,000 
Ending Accounts Receivable = $10,000 
Beginning Accounts Receivable = $16,000

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2 
Average Accounts Receivable = ($16,000 + $10,000) / 2 = $13,000

Uncollectible accounts expense = $4,000

Cash inflow from customers = Credit sales - Uncollectible accounts expense - Decrease in Accounts Receivable 
Decrease in Accounts Receivable = Beginning Accounts Receivable - Ending Accounts Receivable 
Decrease in Accounts Receivable = $16,000 - $10,000 = $6,000

Cash inflow from customers = $64,000 - $4,000 - $6,000 = $54,000

Therefore, the amount of cash inflow from customers that would appear in the operating activities section of the cash flow statement is $54,000. The only answer option that is closest to this amount is option D, $70,000, which is $16,000 (beginning Accounts Receivable) + $64,000 (credit sales) - $10,000 (ending Accounts Receivable).

The Balance in Accounts Receivable at the Beginning of the Year