New England Co. had net cash provided by operating activities of $351,000, net cash used by investing activities of $420,000, and cash provided by financing activities of $250,000. New England’s cash balance was $27,000 on January 1. During the year, there was a sale of land that resulted in a gain of $25,000, and proceeds of $40,000 were received from the sale. What was New England’s cash balance at the end of the year?

$208,000.

Explanation:

New England's cash balance at the end of the year is $208,000 (351,000 - 420,000 + 250,000 + 27,000).

The formula that is used to calculate the Ending Cash Balance is:

  Opening Cash Balance

+ Net Cash provided by Operating Activities

-  Net Cash used by Investing Activities

+ Net Cash provided by Financing Activities

= Ending Cash Balance

The Proceeds received from the sale are already included in the Investing Activities. Gain is also adjusted, we simply deduct it from operating activities and the Proceeds are added back to Investing Activities because we rather receive Proceeds and not Gain.

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