Larry Bar opened a frame shop and completed these transactions: 1. Larry started the shop by investing $40,000 cash and equipment valued at $18,000.
2) Purchased $70 of office supplies on credit.
3) Paid $1,200 cash for the receptionist's salary.
4) Sold a custom frame service and collected $1,500 cash on the sale.
5) Completed framing services and billed the client $200.
What was the balance of the cash account after these transactions were posted?
A)$300.
B)$41,500.
C)$40,300.
D)$38,500.
E)$38,700.

Question

Quizplus · Accepted Answer

To calculate the cash balance, we need to add all the cash inflows and subtract all cash outflows.

Cash inflows:
- Larry's investment of $40,000
- Sale of custom frame service for $1,500

Total cash inflows = $40,000 + $1,500 = $41,500

Cash outflows:
- Purchase of office supplies on credit for $70 (no effect on cash balance as it is on credit)
- Payment of receptionist's salary for $1,200
- Completed framing services and billed the client for $200 (no effect on cash balance as it is on credit)

Total cash outflows = $1,200

Cash balance = Total cash inflows - Total cash outflows
= $41,500 - $1,200
= $40,300

Therefore, the balance of the cash account after these transactions were posted is $40,300. Hence, the correct answer is option C.

Larry Bar Opened a Frame Shop and Completed These Transactions