Firm E cash sales in January are $200,000, its accounts receivable pay

Firm E cash sales in January are $200,000, its accounts receivable payments for January are $100,000, its beginning cash for January is $50,000, and there are no other cash inflows for January.

Its accounts payable payments for the January are $100,000 and its wages and salaries for January are $100,000, and its interest payments for January are $50,000. What is its net cash flow for January if there are no other outflows?
A) $50,000
B) $150,000
C) -$50,000
D) -$150,000

ANSWER

Answer: A
Explanation: A) The total incoming cash flow for January = cash sales for January + accounts receivable payments for January (which are inflows from prior months’ sales) = $200,000 + $100,000 = $300,000. The total outgoing cash flow for the January = accounts payable payments for January + wages and salaries for January + interest payment for January = $100,000 + $100,000 + $50,000 = $250,000. Thus, its net cash flow for January are total incoming cash flow for January – total outgoing cash flow for January = $300,000 – $250,000 = $50,000.