[cultur3]

The following information was taken from the current year financial statements of Planet Corp.:

Accounts receivable, January 1 $ 21,600

Accounts receivable, December 31 30,400

Sales on account and cash sales 438,000

Uncollectible accounts 1,000

No accounts receivable were written off or recovered during the year. If the direct method is used in the current-year statement of cash flows, Planet should report cash collected from customers as:

My questions is why does the 1,000 NOT reduce the cash? You didn’t get it correct? I’m confused :/

F 83 4/09/16
A 85 6/10/16
B 81 7/19/16

[Spartans92]

My guess is since there is no bad debt there is no cash inflow or outflow.

BEC- PASS

[Panda7]

The way i see it is because it says that “No accounts were written off” or recovered during the year. Therefore, no journal entry was made to reduce the AR balance and the cash would not be affected by this transaction.

REG-63,72,66,73,83
BEC-65,74,79
AUD-52,66,74,92
FAR-67--> April re-take

[Andyred04]

Yeah I think Spartans & Panda have it right here. When we first sold the goods we would debit A/R and credit Sales. When we found out we won't be collecting on the debt we would debit Bad Debt Expense and credit A/R. No cash was received in the transaction hence why it was a bad debt.

FAR: 80 (Gleim, Ninja Notes, Ninja MCQs)
REG: 87 (Gleim, Ninja Notes, Ninja MCQs)
BEC: 87 (Gleim, Ninja Notes, Ninja MCQs)
AUD: 8/27/16

PA Candidate

[Author]

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