A firm starts the week with payables of $172,000,it pays $$80,000 of outstanding bills,and purchases $44,000 of raw materials on one month's credit.What is the change in its cash balance over the week?

Question

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At the beginning of the week, payables were $172,000. The firm paid $80,000 of outstanding bills, which reduces payables to $92,000 ($172,000 - $80,000).

The firm also purchased $44,000 of raw materials on credit, so payables increase to $136,000 ($92,000 + $44,000).

There is no information given regarding sales or other cash inflows, so we can assume there were none.

Therefore, the change in cash balance is the difference between the beginning payables and ending payables:

$92,000 - $172,000 = -$80,000

The answer is (C) -$80,000, meaning that the firm's cash balance decreased by $80,000 over the week.

A Firm Starts the Week with Payables of $172,000,it Pays 80,000 of Outstanding Bills,and Purchases $44,000 of Raw Materials on 80,000

A Firm Starts the Week with Payables of $172,000,it Pays $80,000 of Outstanding Bills,and Purchases $44,000 of Raw Materials on$ 80,000