Question

Alpha Company began operations on January 1 with cash of $75,000. All of January's $150,000 sales were on account. During January no customer collections occurred. Cost of goods sold was $40,000, and there was no ending inventories or any accounts payables.

Required:
1. Use this information to determine the ending balance of cash on hand for January. (Round & enter final answers to: the nearest whole dollar for total dollar answers, nearest penny for unit costs or nearest whole number for units)

Answer 1

$35,000

Step-by-step explanation:

From then information given, all sales were on account and no customer collections occurred in January, yet goods at a cost of $40,000 were sold. This means that the profit made in January

= $150,000 - $40,000

= $110,000

Since inventory and accounts payable are nil balances, it means the goods sold were purchased with cash. Hence the ending balance of cash on hand is the difference between the beginning cash balance and the amount of cash spent in the purchase of goods sold.

ending balance of cash on hand

= $75,000 - $40,000

= $35,000