Required information On January 1. 2011 Grace Company had an $17000 balance in t

Question

Required information On January 1. 2011 Grace Company had an $17000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During 2011. Grace provided $59,000 of service on account. The company collected $48,180 cash from account receivable. Uncollectible accounts are estimated to be 20% of sales on account. Based on this information, the amount of cash flow from operating activities that would eappear on the 2011 statement of cash flows is Multiple Choice Prev

Explanation / Answer

Cash Flow From Operating Activities

Account Sales = 59,000

Change in Debtors = (10,820)

Net Cash Flow From Operating Activities = 48,180

Note 1. Provision for Bad debts = 20% of sales on account

= 20% of 59,000

= 11,800

Note 2. Change in Debtors = Opening Debtors - Closing Debtors

= 17,000 - 27,820

= - 10,820

Note 3. Closing Debtors = Opening Debtors + Sales of Account - Cash Received

= 17,000 + 59,000 - 48,180

= 27,820

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