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On January 1, a company had accounts receivable of $20,000. During the year the company sold...

Question:

On January 1, a company had accounts receivable of $20,000. During the year the company sold $100,000 of merchandise to credit customers. At December 31 the company had accounts receivable of $50,000.

How much cash did the company collect from credit customers during the year?

A. $120,000

B. $70,000

C. $130,000

D. $100,000

Accounts Receivable

Accounts Receivable (A/R) refers to the amount of money due to the seller of a certain merchandise from its credit customer, meaning, customers who promised to pay cash for the completion of a transaction after a certain time. Additionally, Accounts Receivable is required by GAAP to be presented at its Net Realizable Value in the financial statements, the amount of which is calculated by deducting the Allowance for Bad Debt from the Gross A/R amount.

Answer and Explanation:

Answer: B. $70,000 which is illustrated thru the general ledger below:


  • Accounts Receivable

Item Debit Credit Item
Beg. Balance $20,000 $70,000 Cash Collections
Sales from Credit Customers 100,000
Ending Balance $50,000

Learn more about this topic:

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Accounts Receivable: Definition, Process & Examples

from Accounting 101: Financial Accounting

Chapter 7 / Lesson 1
70K

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