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Sales were $174,000. Beginning accounts receivable was $58,000 and ending was $34,000. Under the direct method, what is cash received from customers?
A$116,000
B$150,000
C$174,000
D$198,000
Answer & Solution
Correct answer: D. $198,000
1. Cash from customers = beginning AR + sales − ending AR.
2. = $58,000 + $174,000 − $34,000.
3. = $232,000 − $34,000 = $198,000.
4. Trap: $150,000 (option B) subtracts the beginning AR; the formula adds beginning and subtracts ending.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §7.2.4 "Operating activities section (direct method)", p.281_
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