The following items were reported by Morris Plumbing Company: What amount would be reported in the operating activities section of the statement of cash flows for Collections from Customers under the direct method, assuming that all sales are on credit?

Question

The following items were reported by Morris Plumbing Company:  What amount would be reported in the operating activities section of the statement of cash flows for Collections from Customers under the direct method, assuming that all sales are on credit?

Quizplus · Accepted Answer

The collections from customers would be the total amount of credit sales made during the period, which is not given in the provided information. However, since the direct method of preparing the cash flow statement requires analyzing each individual account, the answer cannot be greater than the total amount of credit sales. Therefore, the most appropriate option is the one with the lowest value, which is $975,000.

The Following Items Were Reported by Morris Plumbing Company