The following selected account balances appeared on the financial statements of the Washington Company: The Washington Company uses the direct method to calculate net cash flow from operating activities.
Cash collections from customers are
A) $56,000
B) $52,000
C) $60,000
D) $45,000

Question

The following selected account balances appeared on the financial statements of the Washington Company:  The Washington Company uses the direct method to calculate net cash flow from operating activities.
Cash collections from customers are
A) $56,000 
B) $52,000 
C) $60,000 
D) $45,000

Quizplus · Accepted Answer

To calculate cash collections from customers using the direct method, we need to start with sales revenue and adjust for changes in accounts receivable. 
Sales revenue = $80,000 
Decrease in accounts receivable = $20,000 
Cash collections from customers = Sales revenue - Decrease in accounts receivable = $80,000 - $20,000 = $60,000

The Following Selected Account Balances Appeared on the Financial Statements