Question

Peach Corporation had revenues of $305,000 in its first year of operations. The company has not collected on $20,000 of its sales and still owes $28,100 on $96,500 of merchandise it purchased. The company had no inventory on hand at the end of the year. The company paid $13,800 in salaries. Owners invested $19,500 in the business and $19,500 was borrowed on a five-year note. The company paid $4,700 in interest that was the amount owed for the year, and paid $8,700 for a two-year insurance policy on the first day of business. Peach has an effective income tax rate of 40%. (Assume taxes are paid in the same year). Compute the cash balance at the end of the first year for Peach Corporation. Multiple Choice $200,835 $189,835 O $221,835 O $154,140

Answer 1

Correct Option D i.e. $154140
Calculation of Income statememt
Sales		305,000
Less: merchadize purchaed	-96500
Salary paid	-13800
Interest Paid	-4700
insurance expense	-4350
Total Expense		(119,350)
profit before tax		185,650
Less: tax expense		(74,260)
Net Income		111,390
Calculation of cash balance
Cash collected	285,000
Paid for merchandize	-68400
Salary paid	-13800
Owner's Invested	19500
Borrowed note	19500
Interest Paid	-4700
Insurance Paid	-8700
Tax Payment	(74,260)
Net ending cash balance	154,140