The Cannon Ball Has Projected Its First Quarter Sales at $11,200,second

question 46

Multiple Choice

The Cannon Ball has projected its first quarter sales at $11,200,second quarter sales at $10,900,and third quarter sales at $13,300.The firm's cost of goods sold is equal to 71 percent of the next quarter's sales.The accounts receivable period is 30 days and the accounts payable period is 60 days.At the beginning of the first quarter,the firm has an accounts receivable balance of $2,800 and an accounts payable balance of $6,300.The firm pays $1,500 a month in cash expenses and $200 a month in taxes.At the beginning of the first quarter,the cash balance is $530 and the short-term loan balance is zero.During the first quarter,the firm is planning on spending $2,600 for some new equipment.The firm maintains a minimum cash balance of $20.Assume each month has 30 days.What is the cumulative cash surplus (deficit) at the end of the first quarter,prior to any short-term borrowing?

• A)-$2,403
• B)-$1,983
• C)-$857
• D)-$837
• E)-$667

---

Definitions:

Involuntary Conversion

The forced exchange of an asset into a different form or property, often due to theft, casualty or condemnation, with potential tax implications.

Deferred Gain

A profit from the sale of property or an investment that has been realized but not recognized for tax purposes in the current period.

IRC Section 121

A provision in the Internal Revenue Code that allows homeowners to exclude up to $250,000 ($500,000 if married filing jointly) of capital gains on the sale of their primary residence, subject to certain conditions.

Receipt of Boot

Tax term referring to non-like-kind property or cash received in an exchange, which may trigger taxable gain.