Determine the cash receipts for April based on the following data:
Cash payments during April
$45,500
Cash account balance, April 1
6,750
Cash account balance, April 30
10,000
The Correct Answer and Explanation is :
To determine the cash receipts for April, we can use the cash flow equation:
[
\text{Ending Cash Balance} = \text{Beginning Cash Balance} + \text{Cash Receipts} – \text{Cash Payments}
]
Given data:
- Cash Payments during April = $45,500
- Cash Account Balance (April 1) = $6,750
- Cash Account Balance (April 30) = $10,000
Rearranging the formula to solve for Cash Receipts:
[
\text{Cash Receipts} = \text{Ending Cash Balance} – \text{Beginning Cash Balance} + \text{Cash Payments}
]
Substituting the values:
[
\text{Cash Receipts} = 10,000 – 6,750 + 45,500
]
[
\text{Cash Receipts} = 48,750
]
Explanation:
Cash receipts represent the total amount of cash received during the period. The beginning cash balance ($6,750) is the amount available at the start of April. Throughout the month, the company made cash payments of $45,500, reducing the available cash. By the end of April, the company had an ending cash balance of $10,000.
To find out how much cash was received, we adjust for both the payments made and the change in cash balance:
- Cash Outflow Consideration: Since payments were $45,500, the company had to receive enough cash to cover these payments while still maintaining a higher cash balance at the end.
- Cash Increase Consideration: The cash balance increased from $6,750 to $10,000, meaning more cash was received than spent.
Thus, the total cash receipts for April are $48,750.
Now, I’ll generate an image illustrating this calculation.
Here is an infographic illustrating the cash flow calculation for April. It visually represents the beginning cash balance, cash payments, ending cash balance, and the total cash receipts. Let me know if you need any modifications!