Inc began operations on January 1 of the arrent year with a S 12.000 cash balanc
ID: 2511169 • Letter: I
Question
Inc began operations on January 1 of the arrent year with a S 12.000 cash balance. Forty percent of ales are ollected in the month of sale, eo% are colded in the month following sale. Similarly, 20% of purchases are paid in the month O, purchase and 80% re paid in the month follo ng purch ase. The tollo ng data spply to January and January February 35,00 30,00 7,000 55,00 40,00 9,000 Sales Purchases Operating expenses If operating expenses are paid in the month inourred and indlude monthly depreciation charges of $2.500. determine the change in Rainbows cash balance during February $7.500 inarease S2.000 increase $5,000 increase $4,500 ingease None of the answers is ?rect.Explanation / Answer
firt need to calulcate the ending cash balance of jan monht Beginning balance 12,000 cash collection (35000*40%) 14000 total collection 26,000 less:disbursement purchases (30,000*20%) 6000 operating expense(7000-2500) 4500 Total disbursement 10500 Excess 15,500 feb Beginning balance 15,500 sales collection(35000*60%+55000*40%) 43000 total collection 58,500 less disbursements purchases (30,000*80%+40000*20%) 32000 operating expense 6500 total disbursement 38500 Excess cash 20,000 change in cash for feb increase of $4,500 ans