Tri Fecta, a partnership, had revenues of $360,000 in its first year of operatio

ID: 2416018 • Letter: T

Question

Tri Fecta, a partnership, had revenues of $360,000 in its first year of operations. The partnership has not collected on $35,000 of its sales and still owes $40,000 on $150,000 of merchandise it purchased. There was no inventory on hand at the end of the year. The partnership paid $25,000 in salaries. The partners invested $40,000 in the business and $25,000 was borrowed on a five-year note. The partnership paid $3,000 in interest that was the amount owed for the year and paid $8,000 for a two-year insurance policy on the first day of business.

Compute net income for the first year for Tri Fecta.

Compute the cash balance at the end of the first year for Tri Fecta.

Explanation / Answer

Sales $360,000

less:cost of goods sold 150,000

Gross profit $210,000

less:Salaries expense 25,000

Interest expense 3,000

Insurance policy 4,000

Net income $178,000

Cash balance

Invested 40,000

Borrowed 25,000

Cash collection 325,000

Total collection $390,000

disbursement

Merchandise 110,000

Salaries paid 25,000

Interest 3,000

Prepaid insurance 8,000

Balance $244,000