Last year, Nye Company reported on its income statement sales of $475,000 and cost of goods sold of $240,000. During the year, the balance in accounts receivable increased $40,000, the balance in accounts payable decreased $25,000, and the balance in inventory increased $10,000. The company uses the direct method to determine the net cash provided by operating activities on its statement of cash flows.
-Under the direct method,sales adjusted to a cash basis would be:
A)$435,000
B)$455,000
C)$515,000
D)$375,000

Question

Quizplus · Accepted Answer

The direct method adjusts sales to a cash basis by considering changes in accounts receivable. If accounts receivable decreased by $20,000, it means more cash was collected than sales made, so $455,000 (sales) - $20,000 = $435,000.

Last Year, Nye Company Reported on Its Income Statement Sales