Wolverine, Inc. began operations on January 1 of the current year with a $12,000 cash balance. Forty percent of sales are collected in the month of sale; 60% are collected in the month following sale. Similarly, 20% of purchases are paid in the month of purchase, and 80% are paid in the month following purchase. The following data apply to January and February: JanuaryFebruarySales3500055000Purchases3000040000Operating expenses70009000If operating expenses are paid in the month incurred and include monthly depreciation charges of $2,500, determine the change in Wolverine's cash balance during February.Select one:a.$2,000 increase.b.$4,500 increase.c.$5,000 increase.d.$7,500 increase.e.None of the other answers are correct.

The cash budget shows the position of cash inflow and outflow during a period of time. Budgets are…

Answered: Wolverine, Inc. began operations on…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter15: Managing Short-term Assets

Section: Chapter Questions

Problem 1PROB

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Wolverine, Inc. began operations on January 1 of the current year with a $12,000 cash balance. Forty percent of sales are collected in the month of sale; 60% are collected in the month following sale. Similarly, 20% of purchases are paid in the month of purchase, and 80% are paid in the month following purchase. The following data apply to January and February:

	January	February
Sales	35000	55000
Purchases	30000	40000
Operating expenses	7000	9000

If operating expenses are paid in the month incurred and include monthly depreciation charges of $2,500, determine the change in Wolverine's cash balance during February.

Select one:

$2,000 increase.

$4,500 increase.

$5,000 increase.

$7,500 increase.

None of the other answers are correct.

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