MDB reported sales of $800,000, bad debt expense (allowance method) of $30,000, and an increase in net accounts receivable of $120,000 during 2013. What is MDB's cash collected from customers for 2013 if MDB did not record any write-offs during the period?
A) $650,000
B) $680,000
C) $710,000
D) $800,000

Question

Quizplus · Accepted Answer

Cash collected from customers can be calculated as:
Sales - Increase in net accounts receivable = Cash collected from customers
$800,000 - $120,000 = $680,000 (cash collected if there were no bad debt expenses)

However, since there was a bad debt expense of $30,000, we need to subtract this from the cash collected amount:
$680,000 - $30,000 = $650,000

Therefore, the answer is (A) $650,000.

MDB Reported Sales of $800,000, Bad Debt Expense (Allowance Method)