Wolverine, Inc. began operations on January 1 of the current year with a $11,200

Question

Wolverine, Inc. began operations on January 1 of the current year with a $11,200 cash balance. 40% of sales are collected in the month of sale; 60% are collected in the month following sale. Similarly, 10% of purchases are paid in the month of purchase, and 90% are paid in the month following purchase. The following data apply to January and February:

If operating expenses are paid in the month incurred and include monthly depreciation charges of $1,700, determine the change in Wolverine's cash balance during February.

a.) $200 increase.

b.) $1,900 increase.

c.) $7,400 increase.

d.) $9,100 increase.

e.) Some other amount.

January February   Sales $ 27,000       $ 47,000         Purchases 26,000       32,000         Operating expenses 6,200       8,200      

Explanation / Answer

b.) $1,900 increase Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars January February Sales                 27,000.00                47,000.00 Collection in same month at 40%                 10,800.00                18,800.00 Collection in next month at 60%                16,200.00 Total collecttion a                35,000.00 Purchases                 26,000.00                32,000.00 Payment in same month at 10%                   2,600.00                  3,200.00 Payment in next month at 90%                23,400.00 Total payments b                   2,600.00                26,600.00 Operating Expenses                   6,200.00                  8,200.00 Payment for operating expenses exclduing dep of 1700   c                   4,500.00                  6,500.00 Net collections (Payments)a-b-c                  1,900.00

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