Question

Western Company is preparing a cash budget for June. The company has $11,800 cash at the beginning of June and anticipates $30,200 in cash receipts and $34,900 in cash disbursements during June. Western Company has an agreement with its bank to maintain a minimum cash balance of $10,000. As of May 31, the company owes $15,000 to the bank. To maintain the $10,000 required balance, during June the company must:

Answer 1

See below

Step-by-step explanation:

With regards to the above, we need to compute first the preliminary balance

Preliminary balance = $11,800 + $30,200 - $34,900 = $7,100

Then compute the amount to borrow

Amount to borrow = Minimum cash balance - Preliminary balance

= $10,000 - $7,100

= $2,900

Therefore, to maintain the $10,000 required balance, the company must borrow $2,900 during June.