Wolverine, Inc If Operating Expenses Are Paid in the Month Incurred and Year

question 78

Multiple Choice

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: $\begin{array}{lrr}&\text { January } &\text { February }\\\text { Sales } & \$ 35,000 & \$ 55,000 \\\text { Purchases } & 30,000 & 40,000 \\\text { Operating expenses } & 7,000 & 9,000\end{array}$ 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.

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

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Definitions:

Optimal Pace

Optimal pace refers to the most efficient or effective speed at which an activity or process can proceed to achieve the best outcomes without compromising quality.

Sequencing

The arrangement of events, actions, or items in a particular order.

Buildup of Resistance

The gradual increase in opposition or pushback against a particular idea, change, or directive.

Sense of Continuity

The perception or belief in the ongoing, uninterrupted existence or operation of something.