Using the items below, and the classic T Chart approach, what is the net effect?

Credit Card Bill: $5,000

Car Loan Payment: $500

Mortgage Bill: $1,500

Purchase of Furniture: $2,000

Car Sale: $10,000

Checking Account Deposit: $50,000

Bonus: $7,000

Question

Using the items below, and the classic T Chart approach, what is the net effect?

Credit Card Bill: $5,000

Car Loan Payment: $500

Mortgage Bill: $1,500

Purchase of Furniture: $2,000

Car Sale: $10,000

Checking Account Deposit: $50,000

Bonus: $7,000

BlackTom AI · Accepted Answer

We’re asked to evaluate the net effect using a classic T Chart approach based on the listed items.

First, separate the items into inflows (positive changes to cash) and outflows (negative changes to cash).

Inflows:
- Car Sale: +$10,000
- Checking Account Deposit: +$50,000
- Bonus: +$7,000
Total inflows = 10,000 + 50,000 + 7,000 = +$67,000

Outflows:
- Credit Card Bill: -$5,000
- Car Loan Payment: -$500
- Mortgage Bill: -$1,500
- Purchase of Furniture: -$2,000
Total outflows = 5,000 + 500 + 1,500 + 2,000 = -$9,000

Now combine inflows and outflows to get the net change in cash:
Net change = Inflows + Outflows = 67,000 + (-9,000) = +$58,000

In word form, you add all sources of cash coming in (sales, deposits, bonuses) and subtract all cash going out (payments and purchases). The result shows the overall change in the checking account balance after these transactions.

A few points to watch for potential sources of confusion:
- Only consider items that affect cash directly. Non-cash items or accrual-based expenses would be treated differently in some accounting contexts.
- A car sale increases cash; payments and purchases decrease cash. Ensure you don’t double-count any item (e.g., don’t treat a sale and a purchase of the same item as offsetting each other unless they truly are part of a single cycle).
- If your interpretation uses a different starting balance or groups items differently (e.g., treating the mortgage as only interest vs. principal), the net result could differ.

If you compare to the provided answer key (which lists 48000), note that discrepancies can arise from how some items are categorized or whether certain items are considered within the same period or carried as liabilities versus cash flows. The calculation shown here yields a net change of +$58,000 based strictly on the stated cash-in and cash-out items and their signs in a standard T-chart framework.

ORLJ4002001 Exam 1: Accounting

Using the items below, and the classic T Chart approach, what is the net effect? Credit Card Bill: $5,000 Car Loan Payment: $500 Mortgage Bill: $1,500 Purchase of Furniture: $2,000 Car Sale: $10,000 Checking Account Deposit: $50,000 Bonus: $7,000

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