Mid-Town Auto Parts Company uses the direct method to prepare its statement of cash flows. Refer to the following information reported for 2019:
1) Sales Revenue, $519,000
2) Accounts Receivable, beginning balance, $97,000
3) Accounts Receivable, ending balance, $65,000
Compute the collections from customers.

Question

Mid-Town Auto Parts Company uses the direct method to prepare its statement of cash flows. Refer to the following information reported for 2019: 
1) Sales Revenue, $519,000
2) Accounts Receivable, beginning balance, $97,000
3) Accounts Receivable, ending balance, $65,000
Compute the collections from customers.

Quizplus · Accepted Answer

The collections from customers can be calculated by adding the decrease in accounts receivable to the sales revenue. The decrease in accounts receivable is $97,000 (beginning balance) - $65,000 (ending balance) = $32,000. Therefore, collections from customers = $519,000 (sales revenue) + $32,000 (decrease in accounts receivable) = $551,000.

Mid-Town Auto Parts Company Uses the Direct Method to Prepare