Rainbow, Inc.began operations on January 1 of the current year with a $12,000 cash balance.Forty percent of sales are collected in the month of sale; 60% are collected in the month following sale.Similarly, 20% of purchases are paid in the month of purchase, and 80% are paid in the month following purchase.The following data apply to January and February: If operating expenses are paid in the month incurred and include monthly depreciation charges of $2,500, determine the change in Rainbow's cash balance during February.

Question

Rainbow, Inc.began operations on January 1 of the current year with a $12,000 cash balance.Forty percent of sales are collected in the month of sale; 60% are collected in the month following sale.Similarly, 20% of purchases are paid in the month of purchase, and 80% are paid in the month following purchase.The following data apply to January and February:  If operating expenses are paid in the month incurred and include monthly depreciation charges of $2,500, determine the change in Rainbow's cash balance during February.

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The Answer of Rainbow, Inc.began operations on January 1 of the current year with a $12,000 cash balance.Forty percent of sales are collected in the month of sale; 60% are collected in the month following sale.Similarly, 20% of purchases are paid in the month of purchase, and 80% are paid in the month following purchase.The following data apply to January and February:  If operating expenses are paid in the month incurred and include monthly depreciation charges of $2,500, determine the change in Rainbow's cash balance during February.