A company’s cash sales for May are $300,000, its accounts receivable p

A company’s cash sales for May are $300,000, its accounts receivable payments for May are $200,000, its beginning cash for May is $50,000, and there are no other cash inflows for May.

Its accounts payable payments for May are $250,000, its wages and salaries for May are $100,000, its interest payments for May are $50,000, and there are no other outflows for May. What is the company’s ending cash balance for May?
What will be an ideal response?

ANSWER

Answer: The total incoming cash flow for May = cash sales for May + accounts receivable payments for May = $300,000 + $200,000 = $500,000. The total outgoing cash flow for May = accounts payable payments for May + wages and salaries for May + interest payment for May = $250,000 + $100,000 + $50,000 = $400,000. Thus, its net cash flows for May are total incoming cash flow for May – total outgoing cash flow for May = $500,000 – $400,000 = $100,000. Ending cash balance for May = beginning cash for May + net cash flow for May = $100,000 + $50,000 = $150,000.