Rainbow, Inc

question 50

Multiple Choice

Rainbow, 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:

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

• A) $2,000 increase.
• B) $4,500 increase.
• C) $5,000 increase.
• D) $7,500 increase.
• E) None of the answers is correct.

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Definitions:

Exchange Rate

The price at which one currency can be exchanged for another, affecting international trade and economics.

Imported Swiss Box Of Chocolates

A product category involving chocolates that have been produced in Switzerland and then imported into another country.

Gold Standard

A monetary system in which the standard economic unit of account is based on a fixed quantity of gold, allowing for direct conversion of currency into gold.

Ounce Of Gold

A unit of measure for weighing gold, often used in financial markets and investments to set prices or determine value.