Question

A company uses cash basis accounting. Their income statement for the year shows sales of $600,000 and net operating income of $200,000. Because similar companies report on an accrual basis, the business appraiser adjusts the statements to the accrual basis for comparison. He has accounts receivable of $120,000 and accounts payable of $40,000. Based on this information, the adjusted statements show sales of:

Answer 1

Answer:

$720,000

Explanation:

Data provided in the question:

Sales reported for the year = $600,000

Net operating income = $200,000

Accounts receivable = $120,000

Accounts payable = $40,000

Now,

The adjusted statements show sales of

= Sales reported for the year + Accounts receivable

or

= $600,000 + $200,000

or

= $720,000

hence,

The adjusted statements show sales of $720,000