Davis Ltd provided the following information for the year ended 30 June 2020.
$$\begin{array} { l r }
\text { Sales } & \$ 345000 \
\text { Accounts receivable 1 July 2019 } & 60000 \
\text { Accounts receivable 30 June 2020 } & 50000 \
\text { Bad debts written off during the year* } & 26000
\end{array}$$
Direct method (DR Bad debts expense $26 000; CR Accounts receivable $26 000).
Cash receipts from customers for the year ending 30 June 2020 were:

Question

Davis Ltd provided the following information for the year ended 30 June 2020.
$$\begin{array} { l r } 
\text { Sales } & \$ 345000 \
\text { Accounts receivable 1 July 2019 } & 60000 \
\text { Accounts receivable 30 June 2020 } & 50000 \
\text { Bad debts written off during the year* } & 26000
\end{array}$$
Direct method (DR Bad debts expense $26 000; CR Accounts receivable $26 000).
Cash receipts from customers for the year ending 30 June 2020 were:

Quizplus · Accepted Answer

To calculate cash receipts from customers, start with sales and adjust for the change in accounts receivable, also considering bad debts written off. Sales were $345,000. Accounts receivable decreased by $10,000 ($60,000 - $50,000), which means cash receipts were higher than sales by this amount. However, since bad debts of $26,000 were written off and do not affect cash flow, they need to be added back to the calculation. Thus, cash receipts from customers are $345,000 + $10,000 = $355,000. The correct calculation without adding back the bad debts leads to $345,000 - $60,000 + $50,000 = $335,000, which is not an option, indicating a mistake in my explanation. Correctly, the cash receipts are calculated as sales plus the decrease in accounts receivable, without adjusting for bad debts since they've already been accounted for in the receivables change, leading to $345,000 + $10,000 = $355,000, which is not among the provided options, indicating a mistake in the calculation process. The correct approach is to find the total amount of cash that was supposed to be collected (sales plus the decrease in accounts receivable), then subtract bad debts, which were incorrectly added back in my initial explanation. The correct calculation should directly adjust sales by the change in accounts receivable to reflect actual cash collected, without incorrectly adjusting for bad debts as they affect the receivable balance but not the cash collected directly. Therefore, the correct calculation involves adjusting the sales figure by the net change in accounts receivable, reflecting cash movement without mistakenly adding back bad debts, leading to the realization that the provided options may not directly correspond to the correct calculation method outlined, suggesting a reevaluation of the calculation steps to align with standard accounting practices for determining cash receipts from customers.

Davis Ltd Provided the Following Information for the Year Ended