Question

During the month of July, the company had the following activities: issued 3,800 shares of common stock for 380,000 cash, borrowed105,000 cash from a local bank payable in four years, bought a building for 184,000; paid75,000 in cash and signed a three-year note for the balance, paid cash for equipment that cost 99,000, and purchased supplies for99,000 on account. What was the total amount of cash paid by the company during the month of July?

1) $75,000
2) $174,000
3) $184,000
4) $273,000

Answer 1

The total amount of cash paid by the company during July was $174,000, summing only the cash outflows for the building and equipment.

Step-by-step explanation:

To calculate the total amount of cash paid by the company during the month of July, we need to add up all of the cash outflows. These include the cash payment for the building ($75,000), the cash payment for equipment ($99,000), and the cash to purchase supplies ($99,000 on account implies no cash was paid at that time).

Therefore, the total amount of cash paid is:

$75,000 (building) + $99,000 (equipment) = $174,000.

It is important to note that cash received from issuing shares or borrowing from a bank does not count as a cash payment by the company, but rather as cash inflows. The other transactions listed do not affect the total cash paid because they are not cash outflows.