Hong Kong Clothiers reported revenue of $5,000,000 for its year ended December 31, 2013. Accounts receivable at December 31, 2012 and 2013, were $320,000 and $355,000, respectively. Using the direct method for reporting cash flows from operating activities, Hong Kong Clothiers would report cash collected from customers of:
A)$4,965,000.
B)$5,000,000.
C)$5,035,000.
D)$5,045,000.

Question

Quizplus · Accepted Answer

The cash collected from customers is calculated by adjusting the revenue for the change in accounts receivable. The increase in accounts receivable ($355,000 - $320,000 = $35,000) indicates that not all revenue was collected in cash. Therefore, cash collected = $5,000,000 - $35,000 = $4,965,000.

Hong Kong Clothiers Reported Revenue of $5,000,000 for Its Year