Question

Laurey Inc. is working on its cash budget for May. The budgeted beginning cash balance is $47,000. Budgeted cash receipts total $131,000 and budgeted cash disbursements total $126,000. The desired ending cash balance is $64,000. To attain its desired ending cash balance for May, the company needs to borrow:

Answer 1

$12,000

Step-by-step explanation:

Beginning cash balance = $47,000

Budgeted cash receipts = $131,000

Budgeted cash disbursements = $126,000

The desired ending cash balance = $64,000

The net movements around the cash opening balances, cash receipts, disbursement and borrowing results in the closing balance by the formula below;

The desired ending cash balance = Beginning cash balance + Budgeted cash receipts + Borrowing - Budgeted cash disbursements

$64,000 = $47,000 + $131,000 + Borrowing - $126,000

Borrowing = $64,000 + $126,000 - $47,000 - $131,000

Borrowing = $12,000

Borrowing required to achieve desired closing balance is $12,000