During 2009, Bart’s Brewskies saw a jump in accounts receivables. It went from $10,000 at year end in 2008 to $20,000 at year end in 2009. With the introduction of his newest brewskie, chocolate beer, Bart saw his sales skyrocket. In 2009, his sales were $120,000. How much cash did Bart’s Brewskies take in for 2009?
Explanation
Answer - E - The cash taken in by the company during 2009 was $110,000. This is calculated by: Sales − (2009 A/R − 2008 A/R) or $120,000 − (20,000 − 10,000).
Key Takeaway: If accounts receivables increase between accounting periods, the increase is deducted from net sales. Even though the amounts in the A/R accounts are revenue, they are not cash. The fact that there is a difference between revenue and receipts needs to be remembered when addressing accounts receivable questions.
