Question

On February 1, Stephen Sims started a sporting goods store by contributing $85,000 of his own money to the business. In week two, Stephen's business borrowed $50,000 from a local bank. In week three, Stephen purchased $29,000 worth of inventory for cash. In week four, Stephen purchased a one-year insurance policy in the amount of $3,300 for cash and office equipment for $1,200 that he bought on account. What is the balance in cash at the end of week four?

Answer 1

The cash balance at the end of week four for Stephen's sporting goods store is $102,700 after accounting for all transactions, which include his initial contribution, a loan, inventory purchase, insurance policy payment, and an office equipment purchase on account.

Step-by-step explanation:

To calculate the balance in cash at the end of week four for Stephen's sporting goods store, we must follow each transaction and its impact on the cash balance.

Stephen started with a contribution of $85,000. In the second week, the business borrowed $50,000, which added to the cash balance. In the third week, Stephen purchased inventory, reducing cash by $29,000. In the fourth week, he paid $3,300 for an insurance policy and $1,200 for office equipment on account, meaning the equipment purchase did not immediately affect the cash balance.

After all transactions, the cash balance is calculated as follows:

1. Starting balance: $85,000
2. Plus loan: $50,000
3. Less inventory purchase: -$29,000
4. Less insurance policy: -$3,300
5. Office equipment purchase on account: $0 (no immediate cash impact)

The resulting cash balance at the end of week four is:

$85,000 + $50,000 - $29,000 - $3,300 = $102,700.

Therefore, the balance in cash at the end of week four is $102,700.