For the period, a firm collected $38,200 on accounts receivable, paid $19,700 to suppliers on trade credit, paid $12,000 in cash expenses, purchased for cash a $42,000 piece of equipment that will be depreciated straight-line to zero over 4 years, and had $59,000 of sales of which 15% were cash sales. The firm also paid $13,500 in taxes and interest. The beginning cash balance was $11,300. How much must the firm borrow if it wishes to maintain a minimum cash balance of $10,000?

Question

Quizplus · Accepted Answer

Cash balance = $11,300 + 38,200 - 19,700 - 12,000 - 42,000 + (0.15 × $59,000) - 13,500 - 10,000 = -$38,850; Thus, the firm needs to borrow $38,850.

For the Period, a Firm Collected $38,200 on Accounts Receivable