Question

Tri Fecta, a partnership, had revenues of $374,000 in its first year of operations. The partnership has not collected on $45,700 of its sales and still owes $39,900 on $180,000 of merchandise it purchased. There was no inventory on hand at the end of the year. The partnership paid $25,700 in salaries. The partners invested $49,000 in the business and $21,000 was borrowed on a five-year note. The partnership paid $2,100 in interest that was the amount owed for the year and paid $9,400 for a two-year insurance policy on the first day of business. Ignore income taxes. Compute the cash balance at the end of the first year for Tri Fecta.

Answer 1

Answer:

$221,000

Explanation:

Total cash received:

= (sales revenue - account receivable) + Owner's investment + amount borrowed

= ($374,000 - $45,700) + $49,000 + $21,000

= $398,300

Total cash disbursement:

= (Merchandise purchase - Accounts payable) + salary + interest + insurance

= ($180,000 - $39,900) + $25,700 + $2,100 + $9,400

= $177,300

cash balance at the end of the first year for Tri Fecta:

= Total cash received - Total cash disbursement

= $398,300 - $177,300

= $221,000