Last year Lawton Company reported sales of $110,000 on its income statement. During the year, accounts receivable decreased by $10,000 and accounts payable decreased by $15,000. The company uses the direct method to determine the net cash provided by operating activities on the statement of cash flows. The sales revenue adjusted to a cash basis for the year would be:
A) $125,000
B) $120,000
C) $115,000
D) $105,000

Question

Quizplus · Accepted Answer

The decrease in accounts receivable indicates that more cash was collected than sales made, so $10,000 is added to sales revenue. Therefore, the cash basis sales revenue is $110,000 + $10,000 = $120,000.

Last Year Lawton Company Reported Sales of $110,000 on Its