Leo Company reported sales of $200,000 during Year 2.Assume that all sales are credit sales.Leo's balance sheets for Year 2 and Year 1 showed the following: $$\begin{array} { l r r }
& \text { Year 2 } & \text { Year 1 } \
\text { Accounts receivable } & \$ 90,000 & \$ 80,000 \
\text { Accounts payable } & 64,000 & 60,000
\end{array}$$ Based on this information,how much cash did Leo collect from sales during Year 2?
A) $204,000
B) $210,000
C) $290,000
D) $190,000

Question

Leo Company reported sales of $200,000 during Year 2.Assume that all sales are credit sales.Leo's balance sheets for Year 2 and Year 1 showed the following: $$\begin{array} { l r r } 
& \text { Year 2 } & \text { Year 1 } \
\text { Accounts receivable } & \$ 90,000 & \$ 80,000 \
\text { Accounts payable } & 64,000 & 60,000
\end{array}$$ Based on this information,how much cash did Leo collect from sales during Year 2?
A) $204,000
B) $210,000
C) $290,000
D) $190,000

Quizplus · Accepted Answer

Since all sales are credit sales, the increase in accounts receivable from Year 1 to Year 2 can be assumed to be the amount of credit sales made in Year 2. Therefore, the increase in accounts receivable from Year 1 to Year 2 is $10,000 ($60,000 - $50,000), which represents the credit sales made during Year 2. Since Leo reported total sales of $200,000, it can be concluded that cash collected from sales during Year 2 is $190,000 ($200,000 - $10,000 increase in accounts receivable). Choice D is the correct answer.

Leo Company Reported Sales of $200,000 During Year 2 Based on This Information,how Much Cash Did Leo Collect from All