Answer:
The cash balance at the end of the first year for Alpaca Corporation is $95,220.
Explanation:
Before the cash balance at the end of the first year, the following are first computed:
Insurance for the year = Amount paid for a two-year insurance policy / 2 = $7,800 / 2 = $3,900
Profit before tax = Revenue – Merchandise purchased – Salaries – Interest for the year – Insurance for the year = $245,000 - $95,500 - $12,600 - $3,800 - $3,900 = $129,200
Tax paid = Profit before tax * Tax rate = $129,200 * 40% = $51,680
Cash collected on sales = Revenue – Amount not yet collected on sales = $245,000 - $18,800 = $226,200
Cash paid on merchandise purchased = Merchandise purchased – Amount being owed on merchandise purchased = $95,500 - $26,900 = $68,600
The cash balance at the end of the first year can now be computed as follows:
Cash balance at the end of the first year = Amount invested by the owners in the business + Cash collected on sales - Cash paid on merchandise purchased - Amount paid for a two-year insurance policy - Tax paid - Salaries – Interest for paid = $13,500 + $226,200 - $68,600 - $7,800 - $51,680 - $12,600 - $3,800 = $95,220
Therefore, the cash balance at the end of the first year for Alpaca Corporation is $95,220.
