Morris Plumbing Company
The following items were reported by Morris Plumbing Company:
$\begin{array}{llr}
\text { Accounts receivable, December 31 , Year 2 } &\$250,000\
\text { Accounts receivable, December 31, Year 1 } &225,000\
\text {Sales for Year 2 } &1,000,000
\end{array}$

-Refer to the figure Morris Plumbing Company.Under the direct method,and assuming that all sales are on credit,what amount would be reported in the operating activities section of the Morris Plumbing Company's statement of cash flows for collections from customers?

Question

Morris Plumbing Company
The following items were reported by Morris Plumbing Company:
 $\begin{array}{llr}
  \text {  Accounts receivable, December 31 , Year 2 } &\$250,000\
 \text { Accounts receivable, December 31, Year 1  } &225,000\
 \text {Sales for Year 2  } &1,000,000
\end{array}$

-Refer to the figure Morris Plumbing Company.Under the direct method,and assuming that all sales are on credit,what amount would be reported in the operating activities section of the Morris Plumbing Company's statement of cash flows for collections from customers?

Quizplus · Accepted Answer

Under the direct method, collections from customers are reported as the increase in accounts receivable. The increase in accounts receivable is $250,000 - $225,000 = $25,000. Since all sales are on credit, the collections from customers are equal to sales plus the increase in accounts receivable. Therefore, the collections from customers are $1,000,000 + $25,000 = $1,025,000.

Morris Plumbing Company the Following Items Were Reported by Morris

Morris Plumbing Company
the Following Items Were Reported by Morris