Artist Paints Company uses the direct method for preparing its statement of cash flow.Artist reports the following information regarding 2019: From the income statement:
Sales Revenues,$267,000
Cost of Goods Sold,$210,000
Operating Expenses,$37,000
From the balance sheet:
$$\begin{array} { | l | r | r | }
\hline & \text { Beginning Balance } & \text { Ending Balance } \
\hline \text { Accounts Receivable } & \$ 14,500 & \$ 18,300 \
\hline \text { Merchandise Inventory } & 23,500 & 17,800 \
\hline \text { Accounts Payable } & 6100 & 13,800 \
\hline \text { Accrued Liabilities } & 4700 & 1800 \
\hline
\end{array}$$ What amount will be shown for collections from customers?
A) $263,200
B) $270,800
C) $267,000
D) $32,800

Question

Artist Paints Company uses the direct method for preparing its statement of cash flow.Artist reports the following information regarding 2019: From the income statement:
Sales Revenues,$267,000
Cost of Goods Sold,$210,000
Operating Expenses,$37,000
From the balance sheet:
$$\begin{array} { | l | r | r | } 
\hline & \text { Beginning Balance } & \text { Ending Balance } \
\hline \text { Accounts Receivable } & \$ 14,500 & \$ 18,300 \
\hline \text { Merchandise Inventory } & 23,500 & 17,800 \
\hline \text { Accounts Payable } & 6100 & 13,800 \
\hline \text { Accrued Liabilities } & 4700 & 1800 \
\hline
\end{array}$$ What amount will be shown for collections from customers?
A) $263,200
B) $270,800
C) $267,000
D) $32,800

Quizplus · Accepted Answer

To calculate collections from customers using the direct method, start with Sales Revenues and adjust for the change in Accounts Receivable. Sales Revenues are $267,000. Accounts Receivable increased from $14,500 to $18,300, a change of $3,800. Therefore, collections from customers are Sales Revenues minus the increase in Accounts Receivable: $267,000 - $3,800 = $263,200.

Artist Paints Company Uses the Direct Method for Preparing Its