During 2017 Wheeler Inc. had sales on account of $792,000, cash sales of $324,000, and collections on account of $504,000. In addition, they collected $8,700 which had been written off as uncollectible in 2016. As a result of these transactions the change in the accounts receivable indicates a
A)$603,300 increase.
B)$288,000 increase.
C)$279,300 increase.
D)$612,000 increase.

Question

Quizplus · Accepted Answer

First, we need to calculate the total amount of credit sales for 2017:
$792,000 (sales on account) + $8,700 (collection of previously written off account) = $800,700

Next, we need to calculate the total accounts receivable at the end of 2017:
$800,700 - $504,000 (collections on account) = $296,700

To determine the change in accounts receivable, we need to compare the beginning and ending balances. Unfortunately, the problem does not provide the beginning balance of accounts receivable. However, we can make a reasonable assumption that the beginning balance is equal to the accounts receivable amount at the end of 2016.

Therefore, the change in accounts receivable is calculated as follows: 
Accounts Receivable at End of 2017 - Accounts Receivable at End of 2016
$296,700 - X = Change in Accounts Receivable

We do not know what X (the beginning balance of accounts receivable) is, but we can eliminate any answer choices that result in a decrease in accounts receivable, as this is not possible if the company had credit sales during the year.

For answer choice A: $603,300 increase
This implies that the beginning balance of accounts receivable was -$306,600 (a negative balance). This is not possible, so we can eliminate A.

For answer choice B: $288,000 increase
This implies that the beginning balance of accounts receivable was $0. This is a reasonable assumption, as it implies that all previous accounts receivable had been collected as of the end of 2016. Therefore, B is the correct answer.

For answer choice C: $279,300 increase
This implies that the beginning balance of accounts receivable was -$279,300 (a negative balance). This is not possible, so we can eliminate C.

For answer choice D: $612,000 increase
This implies that the beginning balance of accounts receivable was -$315,300 (a negative balance). This is not possible, so we can eliminate D.