Question

Santos Co. is preparing a cash budget for February. The company has $20,000 cash at the beginning of February and anticipates $75,000 in cash receipts and $100,250 in cash payments during February. What amount, if any, must the company borrow during February to maintain a $5,000 cash balance

Answer 1

$10,250

Step-by-step explanation:

The Cash Budget for February can be summarized as :

Receipts $75,000

Less Payments ($100,250)

Cash movement ($25,250)

Beginning Balance $20,000

Ending Balance ($5,250)

Desired Balance $5,000

Amount to be Borrowed $10,250

The company must borrow $10,250 ($5,000 + $5,250) during February to maintain a $5,000 cash balance.