Saved Help Save Exit Submit Alpaca Corporation had revenues

Saved Help Save& Exit Submit Alpaca Corporation had revenues of $290,000 in its first year of operations. The company has not collected on $19,700 of its sales and still owes $27,800 on $95,000 of merchandise it purchased. The company had no inventory on hand at the end of the year The company paid $13,500 in salaries. Owners invested $18,000 in the business and $18,000 was borrowed on a five-year note. The company paid $4,500 in interest that was the amount owed for the year, and paid $8,500 for a two-year insurance policy on the first day of business. Alpaca has an effective income tax rate of 38%. (Assume taxes are paid in the same year). Compute the cash balance at the end of the first year for Alpaca Corporation. Multiple Choice

Solution

Income before taxes = 290000-95000-13500-4500-4250= $172750 Income taxes = 172750*38%= $65645 Cash balance at the end of first year = 172750-65645-19700+27800+18000+18000-4250= $146955 Option 2 is correct