Question

The Bears Corporation has provided you the following information:Increase in accounts receivable balance 50,000 Net sales 500,000 Gross profit as a percentage of net sales 40%Increase in the inventory account 45,000 Accounts payable balance decreased 17,000 Accounts receivable writeoffs 7,500 Bad debt expense 10,000 Required:a. Determine the cash collected from customers.b. Determine the cash paid to suppliers.

Answer 1

Answer:

A. cash collected is 442,500

B. Cash paid to suppliers is 62,000

Explanation:

A. To determine the cash collected for the period, the account that we should analyze is the accounts receivable.

Net sales 500,000

Less: Increase in accounts receivable 50,000

Less: write off 7,500

total collection 442,500

*increase in accounts receivable means lesser amount of collection than the sale on account

*write off will decrease the accounts receivable which means, it affects the cash collection computation.

B.To determine the cash paid to suppliers, let’s analyze the accounts payable account.

Increase in inventory 45,000

add: decrease in accounts payable 17,000

total cash paid to suppliers is 62,000

*increase in inventory implies an additional purchase made by the company

*decrease in accounts payable resulted from cash payment made to suppliers.