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20.12 Alpha is a sole trader who does not keep proper accounting records.
Alpha’s first year of trading was 20X4. From reviewing Alpha’s bank statements and the incomplete
records relating to cash maintained, the following summary has been compiled.
Bank and cash summary, Alpha, 20X4
$
Cash received from credit customers and paid into the bank 381,600
Expenses paid out of cash received from credit customers before banking 6,800
Cash sales 112,900
Other information, Alpha, 20X4
Irrecoverable debts written off 7,200
Discounts allowed to credit customers 9,400
Closing balance of Trade receivables 0
Which of the following correctly represents Alpha’s sales figure for 20X4?
A $517,900
B $112,900
C $381,600
D $510,900Hello sir, please explain the answer
You must have an answer in the same book in which you found the question. In future please ask about whatever it is in the answer that you are not clear about, and then I will explain.
The total cash received from credit customers = 381,600 + 6,800 = 388,400.
Given that the balance on receivables at the end of the year is zero, and they had written off irrecoverable debts of 7,200 and given discounts of 9,400, it means that the total sales on credit must have been 388,400 + 7,200 + 9,400 = 405,000.
In addition there are cash sales of 112,900.
So total sales must be 405,000 + 112,900 = 517,900.
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