[Jasminekoko]

Hi,

I seem to have problems getting through this question. It’s just a simple basis and I can’t get it. Any explanation would be appreciated.

Bee Co. uses the direct write-off method to account for uncollectible accounts receivable. During an accounting period, Bee’s cash collections from customers equal sales adjusted for the addition or deduction of the following amounts:

Accounts Written-Off Increase in Accounts

Receivable Balance

a. Deduction. Deduction

b. Addition. Deduction

c. Addition. Addition

d. Deduction. Addition

Explanation

Choice “a” is correct. Deduction – Deduction.

During an accounting period, cash collections from customers would equal sales adjusted by deducting “accounts receivable written off” and deducting the “increase in the accounts receivable balance.”

Choices “b”, “d”, and “c” are incorrect based on the above explanation.

[Anonymous]

2015 Sales = 350

. Sales on Account = (50) – (No cash collected) – (Increase in A/R)

. Accounts W/O = (25) – (No cash collected)

Cash Collected = 275 : (350-50-25)

Does that help? Sometimes it's easier to make up numbers and write it out.

[Jasminekoko]

Can you please re-explain a bit more?

[YokuZure]

Under Cirect write-off method , w-offs directly credited to AR – No allowance account is used. Use following formula:
Increase in AR = Sales – Cash Collected – W-off's =>
Cash Collected = Sales – Increase in AR – W-off's

The Question is asking to “finds cash collections” that are equal sales adjusted for the addition or deduction of the following amounts…

[Author]

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