To calculate the cash balance at the end of Alpaca Corporation's first year, we need to consider cash inflows and outflows. Cash Inflows: 1. Revenue collected: $300,000 - $19,900 (uncollected sales) = $280,100 2. Owners' investment: $30,000 Cash Outflows: 1. Purchase of merchandise: $85,000 (note that the company still owes $26,500, so they would have paid $58,500) 2. Salaries paid: $15,000 3. Interest paid: $3,300 4. Payment for insurance policy: $7,800 5. Loan taken (not an outflow, so not subtracted) 6. Income tax: 9% of revenue (not provided, but not subtracted from cash balance unless stated as 'paid') Now, let's compute: Cash balance = Cash Inflows - Cash Outflows Cash balance = ($280,100 + $30,000) - ($58,500 + $15,000 + $3,300 + $7,800) Cash balance = ($310,100) - ($84,600) Cash balance = $225,500 There is not enough information to calculate the exact tax paid, so we'll assume the 9% income tax rate is on profit, which we have not been instructed to calculate or include in the cash balance. We also do not include the $30,000 borrowed, as it is a loan and does not affect the initial cash balance unless explicitly stated it was used for operating costs. Since none of the calculated results match your provided options (A) $231,548, (B) $263,300, (C) $238,499, or (D) $248,900, it's possible that additional information is needed to factor into the calculation, such as the amount of taxes paid if they're considered part of the initial year's cash outflows. Please check the details or provide additional information to accurately compute the ending cash balance according to the options given.

Question

To calculate the cash balance at the end of Alpaca Corporation's first year, we need to consider cash inflows and outflows. Cash Inflows: 1. Revenue collected: $300,000 - $19,900 (uncollected sales) = $280,100 2. Owners' investment: $30,000 Cash Outflows: 1. Purchase of merchandise: $85,000 (note that the company still owes $26,500, so they would have paid $58,500) 2. Salaries paid: $15,000 3. Interest paid: $3,300 4. Payment for insurance policy: $7,800 5. Loan taken (not an outflow, so not subtracted) 6. Income tax: 9% of revenue (not provided, but not subtracted from cash balance unless stated as 'paid') Now, let's compute: Cash balance = Cash Inflows - Cash Outflows Cash balance = ($280,100 + $30,000) - ($58,500 + $15,000 + $3,300 + $7,800) Cash balance = ($310,100) - ($84,600) Cash balance = $225,500 There is not enough information to calculate the exact tax paid, so we'll assume the 9% income tax rate is on profit, which we have not been instructed to calculate or include in the cash balance. We also do not include the $30,000 borrowed, as it is a loan and does not affect the initial cash balance unless explicitly stated it was used for operating costs. Since none of the calculated results match your provided options (A) $231,548, (B) $263,300, (C) $238,499, or (D) $248,900, it's possible that additional information is needed to factor into the calculation, such as the amount of taxes paid if they're considered part of the initial year's cash outflows. Please check the details or provide additional information to accurately compute the ending cash balance according to the options given.

Business · College · Thu Feb 04 2021

llm

Answered on Mon Dec 04 2023

To calculate the cash balance at the end of Alpaca Corporation's first year, we can use the data given on cash inflows and outflows. Here's how you do it:

Inflows: - Revenue collected (net of uncollected sales): $280,100 ($300,000 - $19,900) - Owners' investment: $30,000

Outflows: - Purchases of merchandise paid: $58,500 ($85,000 - $26,500 still owed) - Salaries paid: $15,000 - Interest paid: $3,300 - Payment for insurance policy: $7,800

The cash inflows and outflows above are used to calculate the cash balance, as loan taken is not an outflow and income tax is not deducted unless it's explicitly stated as 'paid'.

Cash balance calculation: \[ \text{Cash balance} = (\text{Revenue collected} + \text{Owners' investment}) - (\text{Purchases of merchandise paid} + \text{Salaries paid} + \text{Interest paid} + \text{Payment for insurance}) \] \[ \text{Cash balance} = (\$280,100 + \$30,000) - (\$58,500 + \$15,000 + \$3,300 + \$7,800) \] \[ \text{Cash balance} = \$310,100 - \$84,600 \] \[ \text{Cash balance} = \$225,500 \]

Therefore, the cash balance at the end of the first year would be $225,500 assuming that the income tax is not paid within this period, or hasn't been deducted, as it isn't included in the cash outflows given.

Extra: Understanding the cash flow for a company is vital for managing its financial health. Cash flows are essentially the money that is moving (flowing) in and out of your business in a given period. For most businesses, especially operating businesses, cash flow is more vital than profit.

- Cash inflows refer to all the money received during a period, including revenues from sales, investments by the shareholders, loans, and other sources.

- Cash outflows are all the expenses paid out in the same period, including operating expenses like salaries, rent, supplies, loan repayments, and other payments.

The cash balance at any given time is the amount of cash on hand after taking into account all inflows and outflows. It's important to distinguish between cash and profit. Profit includes non-cash expenses and receivables, whereas cash flow focuses only on actual cash transactions.

Companies need to manage their cash flow to ensure they have enough to pay their obligations when they are due, even if they are profitable. This is because if a company cannot pay its obligations because it lacks sufficient cash, it can fail even if it has a positive profit. Hence, understanding and managing cash flow is crucial for business sustainability.

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