EX 2-10 Cash account balance

During the month, Warwick Co. received $515,000 in cash and paid out $375,000 in cash.

a. Do the data indicate that Warwick Co. had net income of $140,000 during the month? Explain.

b. If the balance of the cash account is $200,000 at the end of the month, what was the cash balance at the beginning of the month?

Answer:

a. The increase of $140,000 ($515,000 – $375,000) in the cash account does not indicate net income of that amount. Net income is the net change in all assets and liabilities from operating (revenue and expense) transactions. 

b. $60,000 ($200,000 – $140,000)