The following items were reported by Morris Plumbing Company:
$\begin{array} { l }
\text { Accounts receivable, December 31, 2014 } &\$ 250,000 \
\text { Accounts receivable, December 31, 2013 } &225,000 \
\text { Sales for 2014 } &1,000,000
\end{array}$
What amount would be reported in the operating activities section of the statement of cash flows for Collections from Customers under the direct method,assuming that all sales are on credit?

Question

The following items were reported by Morris Plumbing Company: 
$\begin{array} { l } 
\text { Accounts receivable, December 31, 2014 } &\$ 250,000 \
\text { Accounts receivable, December 31, 2013 } &225,000 \
\text { Sales for 2014 } &1,000,000
\end{array}$
 What amount would be reported in the operating activities section of the statement of cash flows for Collections from Customers under the direct method,assuming that all sales are on credit?

Quizplus · Accepted Answer

The direct method reports the actual cash received from customers during the period. In this case, the increase in accounts receivable from $225,000 to $250,000 indicates that $25,000 of sales were not collected in cash. Therefore, the amount reported in the operating activities section of the statement of cash flows for Collections from Customers under the direct method would be $1,000,000 - $25,000 = $975,000.

The Following Items Were Reported by Morris Plumbing Company What Amount Would Be Reported in the Operating Activities Section