Myers Industries reported sales of $220,000 on its income statement.During the year, accounts receivable increased by $25,000 and accounts payable decreased by $15,000.Maddox uses the direct method to determine the net cash provided by operating activities on the statement of cash flows.What is the amount of sales revenue adjusted to a cash basis for the year?

Question

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When using the direct method, the increase in accounts receivable ($25,000) is subtracted from sales because it represents sales that did not result in cash during the period. The decrease in accounts payable ($15,000) is not adjusted against sales revenue as it pertains to expenses, not sales. Therefore, the cash basis sales revenue is $220,000 - $25,000 = $195,000.

Myers Industries Reported Sales of $220,000 on Its Income Statement