Question

Tri Fecta, a partnership, had revenues of $371,000 in its first year of operations. The partnership has not collected on $46,700 of its sales and still owes $38,100 on $170,000 of merchandise it purchased. There was no inventory on hand at the end of the year. The partnership paid $32,800 in salaries. The partners invested $49,000 in the business and $22,000 was borrowed on a five-year note. The partnership paid $2,420 in interest that was the amount owed for the year and paid $9,600 for a two-year insurance policy on the first day of business. Ignore income taxes. Compute the cash balance at the end of the first year for Tri Fecta.

A. 273,420
B. 218,580
C. 231,980
D. 227,180

Answer 1

The cash balance at the end of the first year for Tri Fecta is $311,380. To calculate the cash balance, we subtract the total cash outflows from the total cash inflows.

Step-by-step explanation:

To compute the cash balance at the end of the first year for Tri Fecta, we need to calculate the total cash inflows and deduct the total cash outflows.

The total cash inflows include the revenues collected, investments made by partners, and loans received. In this case, the total cash inflows are as follows:

Revenues collected = $371,000 - $46,700 = $324,300

Investment by partners = $49,000

Loan received = $22,000

The total cash outflows include the purchases made, salaries paid, interest paid, and insurance premium paid. In this case, the total cash outflows are as follows:

Purchases made = $38,100

Salaries paid = $32,800

Interest paid = $2,420

Insurance premium paid = $9,600

To calculate the cash balance, we subtract the total cash outflows from the total cash inflows:

Cash balance = Total cash inflows - Total cash outflows

Cash balance = ($324,300 + $49,000 + $22,000) - ($38,100 + $32,800 + $2,420 + $9,600)

Cash balance = $395,300 - $83,920

Cash balance = $311,380

Therefore, the cash balance at the end of the first year for Tri Fecta is $311,380.