Fruit Valley Inc. reported cash sales of $250,000, credit sales of $850,000, 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 end of the year. What was the balance in the accounts receivable account at the beginning of the year?

Question

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The beginning balance of accounts receivable can be calculated by adjusting the ending balance for the activities during the year. The ending balance is $1,000,000. To find the beginning balance, add the bad debt write-offs ($25,000) and subtract the cash collections ($500,000), then add the credit sales ($850,000). This does not directly involve cash sales, bad debt expense, or the ending balance itself, but rather how the ending balance is affected by the year's transactions. So, the calculation is $1,000,000 - $850,000 + $500,000 + $25,000 = $675,000.