Question

During 2022 Wildhorse Co. had sales on account of $770000, cash sales of $303000, and collections on account of $515000. In addition, they collected $8000 which had been written off as uncollectible in 2021. As a result of these transactions the change in the accounts receivable indicates a

Answer 1

Answer: The answer is $770,000 - $515,000 = $255,000

Explanation: The change in accounts receivable relates to the transactions that affect accounts receivable. In the question, sales on account of $770,000 represents accounts receivables but cash sales of $303,000 does not impact accounts receivable. Collections of $515,000 would cause a reduction in accounts receivable while $8,000 collected that was previously written off would not - it would also impact cash and bad debt recovery. So the only things affecting accounts receivable are: sales on account of $770,000 minus the collections on account of $515,000 leading to $255,000 balance in accounts receivable account.