Question

Colt Inc, uses the accrual basis of accounting. Colt reported sales revenue of $500,000 in 2016. Accounts receivable had a $50,000 balance at the beginning of they year and a $40,000 balance at the end of the year. How much cash was received from customers during 2016?

Answer 1

To determine the cash received from customers, subtract the decrease in accounts receivable from the reported sales revenue.

Step-by-step explanation:

To determine the amount of cash received from customers during 2016, we need to consider the changes in accounts receivable. Accounts receivable is an asset account that represents the amount of money owed to the company by its customers.

At the beginning of the year, the balance in accounts receivable was $50,000. This means that $50,000 of sales revenue from previous periods had not yet been collected.

During 2016, Colt reported sales revenue of $500,000. However, we need to take into account the decrease in accounts receivable from $50,000 to $40,000. This means that $10,000 was collected from customers and reflected in the decrease in accounts receivable. Therefore, the amount of cash received from customers during 2016 was $500,000 - $10,000 = $490,000.