Alpha company has budgeted activity for october to reflect net income $120,000. all sales are credit sales. receivables are planned to increase by $35,000, payables to decrease by $25,000 and depreciation expense is $55,000. use this information to determine how much cash will increase (decrease) during the month of october. (round & enter final answers to: the nearest whole dollar for total dollar answers, nearest penny for unit costs or nearest whole number for units)

The cash is increased by $115,000 during the month of October.

Explanation:

The computation of net effect of cash is shown below:

= Net income - increased in receivables - decrease in payable + depreciation expense

= $120,000 - $35,000 - $25,000 + $55,000

= $115,000

The increase in receivable should be deducted as the outflow of cash is there, which decrease the cash balance so we deduct it

The decrease in account payable reflect that the company has paid the amount which ultimately reduce the cash balance, hence it is deducted in the computation part

Depreciation expense is added in the cash balance because it is a non cash expense.

Thus, the amount is in positive number which reflects increase in cash

Hence, the cash is increased by $115,000 during the month of October.

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