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

Question

Tri Facts, 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 the cash balance at the end of the first year for Tri Facts.

Explanation / Answer

Cash Balance Computation

Cash From Sales ( 360000 – 35000)

325000

- Payment to suppliers (150000 – 40000)

110000

- Salaries Payment

25000

- Investment in partnership

40000

+ Borrowings Made

25000

- Interest Paid

3000

- Insurance Paid

8000

Cash balance

164000

Cash From Sales ( 360000 – 35000)

325000

- Payment to suppliers (150000 – 40000)

110000

- Salaries Payment

25000

- Investment in partnership

40000

+ Borrowings Made

25000

- Interest Paid

3000

- Insurance Paid

8000

Cash balance

164000

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