Tropical Tours reported revenue of $400,000 for its year ended December 31, 2016. Accounts receivable at December 31, 2015 and 2016, were $35,000 and $32,000, respectively. Using the direct method for reporting cash flows from operating activities, Tropical Tours would report cash collected from customers of:

Tropical Tours would report cash collected from customers of $403,000

Explanation:

The movement in the account receivables balance between the start and end of a given period is as a result of additional sales, payments/settlement received and debts written off.

This may be expressed as

Opening balance + sales - payments - write off =  closing balance

This equation is applicable in determining the cash received to be reported in the cash flow statements through the direct method.

Hence using the equation,

$35,000 + $400,000 - payments = $32,000

Payments = $403,000

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