Question

In: Finance

16) Given the information below, calculate the company's cash balance at the end of the year....

16) Given the information below, calculate the company's cash balance at the end of the year.

Cash Balance at Beginning of Year $80,000

Activity During the Year

Increase in Accounts Payable $60,000

Decrease in Accounts Receivable $40,000

Depreciation Expense $500,000

Net Income $2,000,000

Purchase of Fixed Assets $800,000

A) $1,880,000

B) $ 80,000

C) $1,265,000

D) -$1,120,000

Sales of Common Stock $100,000

Decrease in Notes Payable $85,000

Dividends Paid $15,000

Expert Solution

Answer is $1,880,000

Cash flow from operating activities = Net income + Depreciation expense + Decrease in accounts receivable + Increase in accounts payable
Cash flow from operating activities = $2,000,000 + $500,000 + $40,000 + $60,000
Cash flow from operating activities = $2,600,000

Cash flow from investing activities = - Purchase of fixed assets
Cash flow from investing activities = -$800,000

Cash flow from financing activities = Sales of common stock - Decrease in notes payable - Dividends paid
Cash flow from financing activities = $100,000 - $85,000 - $15,000
Cash flow from financing activities = $0

Net increase in cash = Cash flow from operating activities + Cash flow from investing activities + Cash flow from financing activities
Net increase in cash = $2,600,000 - $800,000 + $0
Net increase in cash = $1,800,000

Cash at the end of year = Cash at the beginning of year + Net increase in cash
Cash at the end of year = $80,000 + $1,800,000
Cash at the end of year = $1,880,000

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