Question

Smith Company has the following information on the financial statements: Accounts Receivable at beginning of the year $50,000 Accounts Receivable at end of the year 30,000 Revenues for the year 180,000 Salaries Payable 2,000 Bonds Payable 50,000 Sales Tax Payable 2,000 What is the amount of cash collected from customers?

Answer 1

Answer:

At the start of the year their accounts receivables were 50,000. During the year they earned revenues of 180,000 which means that they are entitle to get 230,000 (180,000+50,000) from the customers. But because the accounts receivables at the end of the year are 30,000 this means that their customers still owe them 30,000. This means that they collected a total of $200,000 cash from their customers.

Another way of looking it is that at the beginning of the year they had receivables of 50,000, they made sales of 180,000 in the current year and had ending receivables of 30,000 so cash collected will be equal to,

Year start receivables + current sales -  Year end receivables

50,000+ 180,000 - 30,000

=$200,000

Explanation: