Question

Sales of the Randolf Inn were $2,000,000 for 20X3. Accounts Receivable—Trade totaled $140,000 and $160,000 at the beginning and end of 20X3, respectively. What were the estimated cash receipts from sales for 20X3?

Answer 1

The estimated cash receipts from sales for the Randolf Inn in 20X3 were $1,980,000, calculated by subtracting the year's increase in accounts receivable ($20,000) from the total sales of $2,000,000.

Step-by-step explanation:

To estimate the cash receipts from sales for 20X3, we need to account for the sales on account that have been collected. The sales of the Randolf Inn were $2,000,000 for 20X3. We start by identifying the change in Accounts Receivable—Trade, which increased by $20,000 from a beginning balance of $140,000 to an ending balance of $160,000.

The increase in accounts receivable indicates that there was $20,000 in sales that were made by the end of the year that had not yet been collected in cash. Hence, these should be subtracted from the total sales to estimate cash receipts.

So, the estimated cash receipts from sales for 20X3 are calculated as follows:

Total sales - Increase in accounts receivable
= $2,000,000 - $20,000
= $1,980,000.

Therefore, the estimated cash receipts from the Randolf Inn's sales for 20X3 were $1,980,000.