Sales for the year were $600,000. Accounts receivable were $100,000 and $80,000 at the beginning and end of the year, respectively. Cash received from customers to be reported on the statement of cash flows using the direct method is:.
a. $620,000
b. $600,000
c. $580,000
d. $700,000

Option A is the correct answer

Explanation:

The cash received from customers can be computed using the formula as stated below:

Cash received=Sales+opening accounts receivable-closing accounts receivable

Cash received=$600000+$100000-$80000

Cash received=$620000

The above has been calculated on the premise that the customers are only owing $80000 as at the end of the year,which means $20000 has been paid from the $100000 owed at the beginning of the year.

Also,since the outstanding debt is only $80000, it means the sale amount of $600000 has also been settled in full,as a result $20000 plus $600000,gives $620000 total cash receipt

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