Benson Incorporated’s cash sales in January are $300,000, its accounts

Benson Incorporated’s cash sales in January are $300,000, its accounts receivable payments for January are $150,000, its beginning cash for January is $75,000, and there are no other cash inflows for January.

Its accounts payable payments for January are $200,000 and its wages and salaries for January are $200,000, and its interest payments for January are $10,000. What is its net cash flow for January if there are no other outflows?
A) $50,000
B) $40,000
C) $15,000
D) -$15,000

ANSWER

Answer: B
Explanation: B) The total incoming cash flow for January = cash sales for January + accounts receivable payments for January (which are inflows from prior months’ sales) = $300,000 + $150,000 = $450,000. The total outgoing cash flow for the January = accounts payable for January + wages and salaries for January + interest payment for January = $200,000 + $200,000 + $10,000 = $410,000. Thus, its net cash flow for January are total incoming cash flow for January – total outgoing cash flow for January = $450,000 – $410,000 = $40,000.