Family Fun reported credit sales of $800,000, cash collections of $550,000 and bad debt expense of $15,000 for last year. Accounts receivable had a balance of $1,000,000 at the beginning of the year. Assuming there are no write-offs made during the year, what was the ending balance in the accounts receivable account?

Question

Quizplus · Accepted Answer

Beginning balance in accounts receivable = $1,000,000
Credit sales during the year = $800,000
Total accounts receivable during the year = $1,000,000 + $800,000 = $1,800,000
Cash collections during the year = $550,000
Bad debt expense during the year = $15,000
Net credit sales during the year = $800,000 - $15,000 = $785,000
Ending balance in accounts receivable = Total accounts receivable during the year - Cash collections during the year - Bad debt expense during the year = $1,800,000 - $550,000 - $15,000 = $1,235,000
Therefore, the correct answer is C.

Family Fun Reported Credit Sales of $800,000, Cash Collections of $550,000