Question

Madison Corporation’s expected beginning cash balance is $35,000. Cash collections are budgeted at $50,000 and cash disbursements are estimated to be $80,000. The minimum required cash balance is $20,000 and the company can borrow as much as needed in increments of $10,000. Calculate the expected ending cash balance for the month.

Answer 1

$25,000

Step-by-step explanation:

The cash balance for Madison's Corporation is:

= beginning balance + cash collections - cash disbursements

= $35,000 + $50,000 - $80,000 = $5,000

Since Madison can borrow money in $10,000 increments, they need to borrow $20,000 to be able to meet the minimum cash balance.

So their expected ending cash balance is = $5,000 + $10,000 + $10,000 = $25,000