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Maxwell Furniture Center had accounts receivable of $20,000, at the beginning of the year, and...

Question:

Maxwell Furniture Center had accounts receivable of $20,000, at the beginning of the year, and $54,000, at year-end. Revenue for the year totaled $116,000. How much cash did the business collect from customers?

a. $150,000

b. $62,000

c. $116,000

d. $82,000

Cash Collections from Credit Sales:

A company can sell the goods and services for cash or for credit and when credit sales are made, the company extends a credit period to the customers for making the payments and then cash is collected at the time of maturity. The cash collected from customers is usually the sum of the beginning accounts receivable and the net sales reduced by the ending accounts receivable.

Answer and Explanation:


Correct answer: Option d) $82,000

Explanation:

Maxwell Furniture Center has informed that:

  • Beginning balance in accounts receivable = $20,000
  • Ending balance in accounts receivable = $54,000
  • Sales revenue = $116,000

Computation:

  • Cash received from customers = Beginning accounts receivable + Sales revenue - Ending accounts receivable
  • Cash received from customers = $20,000 + $116,000 - $54,000
  • Cash received from customers = $82,000

Learn more about this topic:

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Cash Collection & Concentration: Definition & Components

from Finance 101: Principles of Finance

Chapter 18 / Lesson 3
3.2K

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