Pastel Paints Company uses the direct method for its statement of cash flow.It reports the following information regarding the year 2014: From the income statement:
Sales Revenues,$265,000
Cost of Goods Sold,$210,000
Operating expenses,$31,000
From the balance sheet:

- On the statement of cash flows,what amount will be shown for collections from customers?

Question

Pastel Paints Company uses the direct method for its statement of cash flow.It reports the following information regarding the year 2014: From the income statement:
Sales Revenues,$265,000
Cost of Goods Sold,$210,000
Operating expenses,$31,000
From the balance sheet:

- On the statement of cash flows,what amount will be shown for collections from customers?

Quizplus · Accepted Answer

Collections from customers are reported as cash inflows from operating activities in the statement of cash flows under the direct method. To calculate collections from customers, we need to adjust the sales revenue for changes in accounts receivable.

Collections from customers = Sales revenue - decrease in accounts receivable
In this case, we do not have any information about the change in accounts receivable, so we assume that there is no change in accounts receivable.

Collections from customers = Sales revenue
= $265,000

Therefore, the amount shown for collections from customers in the statement of cash flows would be $265,000.

Pastel Paints Company Uses the Direct Method for Its Statement