Rich Company Pty Ltd made these estimates for the three months ending 30 June 2013,its first period of operation.
Estimated:
$\begin{array}{llcc}
\text { Cash receipts from sales } &\$300000 \
\text { Cash payments for expenses } &130000\
\text { Purchase of fixed asset ( $\$ 5000$ will not be paid until August)} &20000\
\text {Depreciation of fixed assets } &15000\
\text {Repayment of a loan } &100000\
\text { } &\
\end{array}$

What is the estimated cash balance at 30 June 2013?

Question

Rich Company Pty Ltd made these estimates for the three months ending 30 June 2013,its first period of operation.
Estimated:
$\begin{array}{llcc}
  \text { Cash receipts from sales } &\$300000  \
 \text { Cash payments for expenses } &130000\
 \text {  Purchase of fixed asset ( $\$ 5000$ will not be paid until August)} &20000\
 \text {Depreciation of fixed assets  } &15000\
 \text {Repayment of a loan  } &100000\
 \text {  } &\
\end{array}$

What is the estimated cash balance at 30 June 2013?

Quizplus · Accepted Answer

Starting with the cash receipts of $300,000 and subtracting the cash payments for expenses of $130,000 gives a subtotal of $170,000. Deducting the purchase of fixed asset of $20,000 (with $5,000 to be paid in August) and the depreciation of fixed assets of $15,000, there is a subtotal of $135,000. Deducting the loan repayment of $100,000 gives an estimated cash balance of $35,000. However, the question asks for the estimated cash balance, not including the payment for the fixed asset that will be made in August. Therefore, we need to add back the $5,000 payment, giving an estimated cash balance of $40,000 surplus at the end of the period. Therefore, the answer is B.

Rich Company Pty Ltd Made These Estimates for the Three