Family Fun reported cash sales of $250,000, credit sales of $750,000, cash collections from receivables of $500,000, bad debt write-offs of $25,000 and bad debt expense of $35,000 for last year. Accounts receivable had a balance of $1,000,000 at the beginning of the year. What was the ending balance in the accounts receivable account?

Question

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Beginning balance of accounts receivable = $1,000,000
Credit sales = $750,000
Cash collections from receivables = $500,000
Cash sales = $250,000
Total sales = $1,000,000 (credit sales + cash sales)

Total collections = $500,000 (cash collections from receivables)
Bad debt write-offs = $25,000
Bad debt expense = $35,000
Net collections = $440,000 (total collections - bad debt write-offs - bad debt expense)

Ending balance of accounts receivable = Beginning balance + Total credit sales - Net collections
= $1,000,000 + $750,000 - $440,000
= $1,310,000

Therefore, the ending balance in the accounts receivable account is $1,225,000 (Option B).

Family Fun Reported Cash Sales of $250,000, Credit Sales of $750,000