Question

Nest Company started Year 2 with a beginning balance of $7,000 in accounts receivable. During the year, revenue on account amounted to $13,000. The company incurred $3,000 of expenses on account and paid dividends of $500. If the company had an ending balance in accounts receivable of $2,000, how much cash was collected from customers?

Answer 1

Cash collected from customers by Nest Company is calculated by adjusting the accounts receivable balance with the revenue on account, resulting in an amount of $18,000 collected during the year.

Step-by-step explanation:

To calculate the cash collected from customers by Nest Company, we need to analyze the changes in accounts receivable and incorporate revenue figures. The company began Year 2 with a beginning balance of $7,000 in accounts receivable and ended with a $2,000 balance. By recognizing that during the year, revenue on account was $13,000, we can use the following formula to find out the cash collected:

Step-by-Step Calculation

1. Determine the amount of credit sales collected: Beginning Accounts Receivable + Revenue on Account - Ending Accounts Receivable.
2. Substitute the given values: $7,000 + $13,000 - $2,000 = $18,000.
3. The amount of cash collected from customers is therefore $18,000.

Note that expenses and dividends do not factor into this calculation as they pertain to accounts payable and equity transactions, respectively, not to the collection of receivables.