A general contractor has accounts receivable of $125,000 at the beginning of the month, invoices $85,000 in new work, and collects $95,000 during the month. What is the ending accounts receivable balance?
Correct Answer
A) $115,000
Ending A/R = Beginning A/R + New Invoices - Collections = $125,000 + $85,000 - $95,000 = $115,000. This follows the basic accounts receivable formula.
Why This Is the Correct Answer
The correct answer follows the fundamental accounts receivable formula used in construction accounting. Starting with $125,000 owed to the company, adding $85,000 in new invoices increases what customers owe, while collecting $95,000 reduces the balance. The calculation $125,000 + $85,000 - $95,000 = $115,000 represents the money still owed by customers at month-end.
Why the Other Options Are Wrong
Option B: $305,000
This incorrectly adds all three numbers together ($125,000 + $85,000 + $95,000 = $305,000), treating collections as an addition rather than a reduction to accounts receivable.
Option C: $210,000
This represents only the beginning balance plus new invoices ($125,000 + $85,000 = $210,000) without subtracting the collections that were actually received.
Option D: $95,000
This shows only the amount collected during the month, ignoring both the beginning balance and new invoices that remain unpaid.
Memory Technique
Use the acronym 'BIN-C': Beginning balance + Invoices - Collections = New ending balance. Think of putting invoices IN the receivables bin, then taking Collections out.
Reference Hint
Business and Finance for Contractors - Chapter on Financial Statements and Cash Flow Management, specifically the section on Accounts Receivable tracking
More Business & Finance Questions
A contractor's license expires on March 31st. If they submit a renewal application on April 15th, what additional requirement must be met under Florida regulations?
A general contractor purchases equipment worth $45,000 with a useful life of 9 years and no salvage value. Using straight-line depreciation, what is the annual depreciation expense?
In Florida, what is the minimum workers' compensation insurance coverage required for construction companies with employees?
What is the typical recommended coverage amount for general liability insurance for a small to medium-sized general contracting business?
A contractor estimates startup costs of $75,000 for equipment, $25,000 for initial inventory, $15,000 for insurance premiums, and $10,000 for working capital. They can finance 70% of the total. How much cash do they need?
People Also Study
Previous Question
A 55-year-old experienced carpenter is laid off during a company downsizing, while younger employees with less experience are retained. Under the Age Discrimination in Employment Act (ADEA), this could constitute age discrimination if the company has:
Next Question
According to Florida construction industry standards, what is the minimum frequency for conducting safety meetings on active construction sites?