Question

The following information was taken from the financial statements of Hofburg Corp. for the year just ended:

Accounts receivable, January 1 $ 21,600
Accounts receivable, December 31 30,400
Sales on account and cash sales 438,000
Uncollectible accounts 1,000
No accounts receivable were written off or recovered during the year. If the direct method is used in its statement of cash flows, Hofburg should report cash collected from customers as
A. $447,800
B. $446,800
C. $428,200
D. $429,200

Answer 1

D. $429,200

Step-by-step explanation:

• Cash collected from customers

$438,000 Sales on account and cash sales

-$8,800 Collected from customers

$429,200 Cash collected from customers

The cash collected from customers is the total amount of sales made during the year plus/minus the variation in the accounts receivable comparing the accounts at the beginning of the year with the balance at the end of the year.

Total sales during the year were $438,000, and the variation of the accounts receivable was a negative value of -$8,800, because the company expands its line of credit to its customers, which increases in the total balance of accounts receivable. This analisys gives a total of Cash collected from customers of $429,200.