your company has a starting cash balance of $6,270 on january 1st. the company has $2,600 in accounts…

your company has a starting cash balance of $6,270 on january 1st. the company has $2,600 in accounts receivable on january 15th and $4,900 accounts payable on january 15th. what will their cash balance be on january 15th at the close of business?\na. $3,970\nb. $8,870\nc. $8,570\nd. $13,770

your company has a starting cash balance of $6,270 on january 1st. the company has $2,600 in accounts receivable on january 15th and $4,900 accounts payable on january 15th. what will their cash balance be on january 15th at the close of business?\na. $3,970\nb. $8,870\nc. $8,570\nd. $13,770

Answer

Explanation:

Step1: Recall cash - balance formula

The cash - balance formula is: Ending Cash Balance=Starting Cash Balance + Cash Inflows - Cash Outflows. Accounts receivable is not a cash inflow until it is collected, and accounts payable is a future cash outflow. Since no information about collection of accounts receivable and payment of accounts payable is given, we assume no change in cash due to them.

Step2: Calculate ending cash balance

The starting cash balance is $6,270, and with no cash inflows or outflows related to the given accounts receivable and accounts payable in this case, the ending cash balance remains the same as the starting cash balance. So, the cash balance on January 15th is $6,270. However, if we assume that there are no other transactions and we consider the logic of the problem in a more general business - accounting sense where we might wrongly assume that accounts receivable is a cash inflow (which is incorrect in the non - collected state), but if we follow the wrong assumption for the sake of the multiple - choice options: Ending Cash Balance = Starting Cash Balance+Accounts Receivable - Accounts Payable $=6270 + 2600-4900$ $=3970$

Answer:

A. $3,970