The following selected account balances appeared on the financial statements of the Washington Company: The Washington Company uses the direct method to calculate net cash flow from operating activities.
Cash collections from customers are
A) $56,000
B) $52,000
C) $60,000
D) $45,000

Question

The following selected account balances appeared on the financial statements of the Washington Company:  The Washington Company uses the direct method to calculate net cash flow from operating activities.
Cash collections from customers are
A) $56,000 
B) $52,000 
C) $60,000 
D) $45,000

Quizplus · Accepted Answer

To calculate the cash collections from customers, we need to start with the sales revenue and adjust for changes in accounts receivable. 
Sales revenue = $60,000 
Accounts receivable: 
Beginning balance = $8,000 
Ending balance = $12,000 
Change in accounts receivable = Ending balance - Beginning balance = $12,000 - $8,000 = $4,000 (increase)

Therefore, the cash collections from customers = Sales revenue - Increase in accounts receivable = $60,000 - $4,000 = $56,000.

Hence, the correct answer is C as it represents the correct calculation of cash collections from customers.

The Following Selected Account Balances Appeared on the Financial Statements