Osco Ltd uses the allowance method of accounting for bad and doubtful debts. Bad and doubtful debts expense shown in the income statement is $10 000 and the amount of bad debts actually written off is $8 000. If sales are $220 000 and accounts receivable have increased by $12 000 over the period, the amount to be shown in the statement of cash flows for receipts from customers is:

Question

Quizplus · Accepted Answer

The cash receipts from customers can be calculated as: Sales ($220,000) - Increase in accounts receivable ($12,000) - Bad debts written off ($8,000) = $200,000.

Osco Ltd Uses the Allowance Method of Accounting for Bad