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Alpaca Corporation had revenues of $275,000 in its first year of operations. The company has not...

Alpaca Corporation had revenues of $275,000 in its first year of operations. The company has not collected on $19,400 of its sales and still owes $27,500 on $98,500 of merchandise it purchased. The company had no inventory on hand at the end of the year. The company paid $13,200 in salaries. Owners invested $16,500 in the business and $16,500 was borrowed on a five-year note. The company paid $4,200 in interest that was the amount owed for the year, and paid $8,200 for a two-year insurance policy on the first day of business. Alpaca has an effective income tax rate of 40%. (Assume taxes are paid in the same year).

Compute the cash balance at the end of the first year for Alpaca Corporation.

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Expert Solution

Calculation of Income statememt
Sales           275,000
Less: merchadize purchaed          (98,500)
Salary paid          (13,200)
Interest Paid            (4,200)
insurance expense            (4,100)
Total Expense         (120,000)
profit before tax           155,000
Less: tax expense           (62,000)
Net Income              93,000
Calculation of cash balance
Cash collected          255,600
Paid for merchandize          (71,000)
Salary paid          (13,200)
Owner's Invested            16,500
Borrowed note            16,500
Interest Paid            (4,200)
Insurance Paid            (8,200)
Tax Payment          (62,000)
Net ending cash balance          130,000

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