Answer:
The cash is increased by $115,000 during the month of October.
Explanation:
The computation of net effect of cash is shown below:
= Net income - increased in receivables - decrease in payable + depreciation expense
= $120,000 - $35,000 - $25,000 + $55,000
= $115,000
The increase in receivable should be deducted as the outflow of cash is there, which decrease the cash balance so we deduct it
The decrease in account payable reflect that the company has paid the amount which ultimately reduce the cash balance, hence it is deducted in the computation part
Depreciation expense is added in the cash balance because it is a non cash expense.
Thus, the amount is in positive number which reflects increase in cash
Hence, the cash is increased by $115,000 during the month of October.
