Question

Durango Co. has cash receipts of $120,000 and total cash disbursements of $112,000. Durango Co. started with a beginning cash balance of $4,000 and desires an ending cash balance of $8,000. Durango Co. can borrow money in $1,000 increments. How much debt can Durango Co. repay and still meet its desired cash requirement?

Answer 1

See below

Step-by-step explanation:

Form the above, we can compute Durango Co loan repayment as seen below;

= Beginning cash balance + Cash receipts - total cash disbursement

= $4,000 + $120,000 - $112,500 = 11,500

Ending cash balance = $8,000

Then,

= $11,500 - $8,000

= $2,500

It therefore means that Durango Co. can repay $2,500 and still meets its desired cash requirement