A firm reported that accounts receivable increased by $20 000 between the current year and the prior year. If accrual-basis sales were $150 000 the amount of cash received from customers during the year was:

Question

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Accounts receivable represents the amount that customers owe to the company for goods or services sold on credit. An increase in accounts receivable means that the company has made sales on credit during the year, but has not yet collected cash payments from customers for those sales. Therefore, the amount of cash received from customers during the year would be the accrual-basis sales minus the increase in accounts receivable.

Cash received from customers = Accrual-basis sales - Increase in accounts receivable 
Cash received from customers = $150 000 - $20 000 = $130 000

Therefore, the answer is B) $130 000.

A Firm Reported That Accounts Receivable Increased by $20 000