The following information relates to the Fowler Company for 2010: Sales discounts $ 700 Beginning accounts receivable 5 , 000 Collections on accounts receivable 20 , 000 Total sales seported on income statement 82 , 500 Ending accountsreceivable 7 , 000 \begin{array}{ll} ext { Sales discounts } & \$ 700 \ ext { Beginning accounts receivable } & 5,000 \ ext { Collections on accounts receivable } & 20,000 \ ext { Total sales seported on income statement } & 82,500 \ ext { Ending accountsreceivable } & 7,000\end{array} Sales discounts Beginning accounts receivable Collections on accounts receivable Total sales seported on income statement Ending accountsreceivable $700 5 , 000 20 , 000 82 , 500 7 , 000 What was the amount of cash sales?A) $61, 200B) $59, 800C) $63, 800D) $65, 200

Question

The following information relates to the Fowler Company for 2010:    Sales discounts  $ 700  Beginning accounts receivable  5 , 000  Collections on accounts receivable  20 , 000  Total sales seported on income statement  82 , 500  Ending accountsreceivable  7 , 000 \begin{array}{ll}	ext { Sales discounts }  &  \$ 700 \	ext { Beginning accounts receivable }  &  5,000 \	ext { Collections on accounts receivable }  &  20,000 \	ext { Total sales seported on income statement }  &  82,500 \	ext { Ending accountsreceivable }  &  7,000\end{array}  Sales discounts   Beginning accounts receivable   Collections on accounts receivable   Total sales seported on income statement   Ending accountsreceivable  ​ $700 5 , 000 20 , 000 82 , 500 7 , 000 ​   What was the amount of cash sales?A) $61, 200B) $59, 800C) $63, 800D) $65, 200

Emily Pundzius · Accepted Answer

Final Answer : B, Explanation :  To find the amount of cash sales, we first calculate the total sales revenue recognized from credit sales. This involves adjusting the total sales reported on the income statement for sales discounts and then determining the net change in accounts receivable to find the credit sales portion. The cash sales can then be calculated by subtracting the credit sales from the total sales.1. Adjust total sales for sales discounts: $82,500 - $700 = $81,800.2. Calculate the net change in accounts receivable: Ending AR ($7,000) - Beginning AR ($5,000) = $2,000 increase.3. Collections on accounts receivable represent the cash collected from credit sales, so to find the credit sales, we add the increase in accounts receivable to the collections: $20,000 + $2,000 = $22,000.4. Subtract the credit sales from the adjusted total sales to find cash sales: $81,800 - $22,000 = $59,800.

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