ChatGPT vs Grok

Question: The beginning balance in Accounts Receivable on Company A’s Year 2 Balance Sheet is $20,000 and the ending balance is $110,000. Cash collections from customers are $105,000, and an account for a customer owing $5,000 was written off because the company didn’t think the customer would pay. What is the Sales on account during Year 2 on the Year 2 Income Statement? Assuming no other transactions affected the account during the year.

Answer by chatGPT:

Understanding Sales on Account Calculation

The formula for Accounts Receivable (AR) is:Ending AR=Beginning AR+Sales on Account−Cash Collections−Write-offs\text{Ending AR} = \text{Beginning AR} + \text{Sales on Account} – \text{Cash Collections} – \text{Write-offs}Ending AR=Beginning AR+Sales on Account−Cash Collections−Write-offs

Step 1: Identify Given Information

Beginning AR (Year 2 Balance Sheet) = $20,000
Ending AR (Year 2 Balance Sheet) = $110,000
Cash Collected from Customers = $105,000
Write-off of Uncollectible Account = $5,000
Sales on Account = Unknown (to be solved)

Step 2: Solve for Sales on Account

Using the formula:110,000=20,000+Sales on Account−105,000−5,000110,000 = 20,000 + \text{Sales on Account} – 105,000 – 5,000110,000=20,000+Sales on Account−105,000−5,000 Sales on Account=110,000−20,000+105,000+5,000\text{Sales on Account} = 110,000 – 20,000 + 105,000 + 5,000Sales on Account=110,000−20,000+105,000+5,000 Sales on Account=130,000\text{Sales on Account} = 130,000Sales on Account=130,000

Final Answer:

✔ Sales on Account for Year 2 = $130,000 ✅

Answer by Grok3:

To determine the Sales on account during Year 2 for Company A, we need to analyze the changes in the Accounts Receivable (A/R) account and account for the given transactions: cash collections and the write-off. Sales on account represents the credit sales made during the period, which increase Accounts Receivable, while cash collections and write-offs decrease it. Let’s break this down step-by-step.

The Accounts Receivable balance follows this relationship:

Beginning A/R + Sales on account – Cash collections – Write-offs = Ending A/R

We are given:

Beginning A/R = $20,000
Ending A/R = $110,000
Cash collections = $105,000
Write-off = $5,000

We need to solve for Sales on account (let’s call it S S S).

Using the equation: 20,000+S−105,000−5,000=110,000 20,000 + S – 105,000 – 5,000 = 110,000 20,000+S−105,000−5,000=110,000

Now, simplify and solve:

Combine the known terms on the left: 20,000−105,000−5,000=−90,000 20,000 – 105,000 – 5,000 = -90,000 20,000−105,000−5,000=−90,000 So the equation becomes: −90,000+S=110,000 -90,000 + S = 110,000 −90,000+S=110,000
Isolate S S S: S=110,000+90,000 S = 110,000 + 90,000 S=110,000+90,000 S=200,000 S = 200,000 S=200,000

Thus, Sales on account during Year 2 is $200,000.

To verify:

Start with Beginning A/R: $20,000
Add Sales on account: $20,000 + $200,000 = $220,000
Subtract Cash collections: $220,000 – $105,000 = $115,000
Subtract Write-off: $115,000 – $5,000 = $110,000
This matches the Ending A/R of $110,000, confirming the calculation.

Therefore, the Sales on account during Year 2 on the Year 2 Income Statement is $200,000.