Question

Patricia Johnson opened a law office on July 1, 2020. On July 31, the balance sheet showed Cash 5,100, Accounts Receivable1,900, Supplies 400, Equipment6,000, Accounts Payable 4,300, and Owner's Capital9,100. During August, the following transactions occurred.

1. Collected 1,600 of accounts receivable.
2. Paid2,800 cash on accounts payable.
3. Recognized revenue of 6,800, of whiCH₂,600 is collected in cash and the balance is due in September.
4. Purchased additional equipment for 1,900, paying400 in cash and the balance on account.
5. Paid salaries 2,500, rent for August1,100, and advertising expenses 450.
6. Withdrew700 in cash for personal use.
7. Received 1,200 from Standard Federal Bank–money borrowed on a note payable.
8. Incurred utility expenses for the month on account330.

What is the total amount of cash at the end of August?

Answer 1

The total amount of cash at the end of August is $2,600.

Step-by-step explanation:

To calculate the total amount of cash at the end of August, we need to consider the cash transactions that occurred during the month.

1. Collected $1,600 of accounts receivable, increasing cash by $1,600.
2. Paid $2,800 cash on accounts payable, decreasing cash by $2,800.
3. Recognized revenue of $6,800, of which $2,600 is collected in cash and the balance is due in September. This increases cash by $2,600.
4. Purchased additional equipment for $1,900, paying $400 in cash and the balance on account. This decreases cash by $400.
5. Paid salaries of $2,500, rent for August of $1,100, and advertising expenses of $450. This decreases cash by $4,050.
6. Withdrew $700 in cash for personal use. This decreases cash by $700.
7. Received $1,200 from Standard Federal Bank as a loan. This increases cash by $1,200.
8. Incurred utility expenses for the month on account of $330. This does not affect cash.

Now, we can calculate the total amount of cash at the end of August. Starting with the initial cash balance of $5,100 and factoring in the cash transactions, we have:

Total cash at the end of August = Initial cash balance + Cash collected - Cash paid

Total cash at the end of August = $5,100 + $1,600 + $2,600 - $2,800 - $400 - $4,050 - $700 + $1,200 = $2,600

Therefore, the total amount of cash at the end of August is $2,600.