34. Burke Inc.\'s accounts receivable balance increased during the year from $30

Question

34. Burke Inc.'s accounts receivable balance increased during the year from $300,000 to $360,000. Based on this information, which of the following statements is true? a. Cash received from customers was greater than sales revenue recorded during the year b. Cash received from customers was less than sales revenue recorded during the year. c. Cash received from customers was exactly equal to sales revenue recorded during the year. d. Cash received from customers was higher than cash paid to suppliers during the year. The difference between the direct method and the indirect methods of preparing the statement of cash flows is primarily visible in which of the following sections? a. Operating activities section only b. Investing activities section only c. Both operating and investing activities d. Both investing and financing activities 35 36. Simmon Incorporation's cost of goods purchased amounted to $20,000. From the beginning until end of 2011, accounts payable increased by a net amount of $7,000. How much "cash outflows fo purchases" should Simmons report for 2011 on their statement of cash flows? a. 7,000 b. $13,000 c. $20,000 d. $27,000 37. McClintock Inc. had the following information available from its 2011 balance sheet and income statement: Insurance expense Prepaid insurance- beginning Prepaid insurance- ending $15,000 30,000 25,000 What amount would be reported as cash outflows for insurance on the statement of cash flows for 2011 using the direct method? a. $70,000

Explanation / Answer

Solution:

Accounts receivable during the year increased from $300,000 to $360,000. It means that we have received less cash by $60,000 from actual sales revenue because our accounts receivables is increased. If our accounts receivable got decreased then it means we collected cash more than our sales revenue.

Therefore b statement is correct. "Cash received from customer was less than sales revenue recorded during the year"

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