Answer (B) is correct . Collections on account equal beginning accounts receivable of $180,000, plus sales on account of $800,000, minus budgeted ending accounts receivable of $210,000, or $770,000. The beginning cash balance of $50,000, plus cash collections on account of $770,000, minus budgeted cash disbursements of $780,000 equals $40,000. Depreciation of $25,000 is excluded because it is a noncash expense.
Answer (A) is incorrect because The amount of $15,000 includes depreciation expense which should be excluded because it is a noncash expense.
Answer (C) is incorrect because The amount of $770,000 ($180,000 + $800,000 – $210,000), not $800,000, was the amount of cash collected for receivables. Also, the $25,000 of depreciation should not be deducted because it is a noncash expense.
Answer (D) is incorrect because The amount of $770,000 ($180,000 + $800,000 – $210,000), not $800,000, was the amount of cash collected for receivables.
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What is the expected cash balance of the company at the end of the coming month?
