Parks Company reported an increase of $370,000 in its accounts receivable during the year 2017.The company's statement of cash flows for 2017 using the direct method reported $1 million of cash received from customers.What amount of net sales must Parks have recorded in 2017?

Question

Quizplus · Accepted Answer

The increase in accounts receivable indicates an increase in sales that were not yet collected as cash. Therefore, to calculate the net sales, we need to subtract the increase in accounts receivable from the cash received from customers:
Net sales = cash received from customers - increase in accounts receivable
Net sales = $1,000,000 - $370,000
Net sales = $630,000
Therefore, the net sales recorded by Parks Company in 2017 must have been $630,000. However, this amount may include sales made in previous years that were collected during 2017, so it does not necessarily indicate the total sales made by the company during the year.

Parks Company Reported an Increase of $370,000 in Its Accounts