The Following Items Were Reported on the Balance Sheets and Income

question 110

Multiple Choice

The following items were reported on the balance sheets and income statement for Carlton Co.: What amount would be reported in the operating activities section of the statement of cash flows for collections from customers under the direct method assuming that all sales are on credit?

• A) $850,000
• B) $857,000
• C) $843,000
• D) Cannot be determined without further information.

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Definitions:

Sales Returns And Allowances

Sales returns and allowances account for the reduction in sales revenues due to returned or defective products allowed by a company to its customers.

Sales Discounts

Reductions in the price of goods or services offered to customers, typically in exchange for early payment.

Expense Accounts

Accounts used to track the costs incurred in a business's operational activities, not directly tied to the production of goods or services.

Operating Expenses

Costs associated with the day-to-day operations of a business, excluding costs directly associated with the production of goods or services.