Alpaca Corporation had revenues of $300,000 in its first year of operations. The company has not collected on $19,900 of its sales and still owes $28,000 on $96,000 of merchandise it purchased. The company had no inventory on hand at the end of the year. The company paid $13,700 in salaries. Owners invested $19,000 in the business and $19,000 was borrowed on a five-year note. The company paid $4,600 in interest that was the amount owed for the year, and paid $8,600 for a two-year insurance policy on the first day of business. Alpaca 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 Alpaca Corporation.

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10-09-2019
Business

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Alpaca Corporation had revenues of $300,000 in its first year of operations. The company has not collected on $19,900 of its sales and still owes $28,000 on $96,000 of merchandise it purchased. The company had no inventory on hand at the end of the year. The company paid $13,700 in salaries. Owners invested $19,000 in the business and $19,000 was borrowed on a five-year note. The company paid $4,600 in interest that was the amount owed for the year, and paid $8,600 for a two-year insurance policy on the first day of business. Alpaca 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 Alpaca Corporation.

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TomShelby TomShelby · Answer 1 · 2019-09-18T03:17:10+02:00

Answer:

Cash at the end of the year: 150,820

Explanation:

sales 300,000

uncollected: (19,900)

collected: 280,100

purchase 96,000

unpaid (28,000)

paid 68,000

Operating activities

Operating

collected 280,100

paid to supplies (68,000)

salaries (13,700)

insurance paid (8,600)

income tax paid (72,560) (A)

generated from operating 117,240

Financing:

contribution 19,000

note payabke 19,000

interest payment (4,600)

generated from financing 33,400

Cash at the end of the year: 117,240 + 33,400 = 150,820

(A) the tax expense will be calculating the income statement.

net income:

sales revenue 300,000

COGS (96,000) (B)

salaries expense (13,700)

interest expense (4,600)

insurance expense (4,300) (C)

pre-tax income 181,400

tax expense 40% (72,560)

net income 108,840

(B) There is no inventory at hand so, all the purchase are cost of goods sold.

(C) The insurance expense will be the expense for half the contract value because, it is for two years