Last year Lawn Corporation reported sales of $115,000 on its income statement. During the year, accounts receivable decreased by $10,000 and accounts payable increased by $15,000. The company uses the direct method to determine the net cash provided by (used in) operating activities on the statement of cash flows. The sales revenue adjusted to a cash basis for the year would be:
A) $125,000
B) $90,000
C) $140,000
D) $100,000

Question

Quizplus · Accepted Answer

The decrease in accounts receivable indicates that more cash was collected than sales made, so add $10,000 to sales. The increase in accounts payable does not affect cash collections from sales. Therefore, cash collected from customers is $115,000 + $10,000 = $125,000.

Last Year Lawn Corporation Reported Sales of $115,000 on Its