Final answer:
Striker Company needs to calculate the amount it needs to borrow by comparing its total cash available at period-end with its desired minimum cash balance. After conducting the calculation, it is determined that the company needs to borrow $25,000 to maintain the minimum cash balance of $40,000.
Step-by-step explanation:
The Striker Company needs to calculate how much cash it will need to borrow based on its expected cash receipts, expected cash disbursements, beginning cash balance, and the desired minimum cash balance. The calculation is as follows:
Expected cash receipts: $80,000
Expected cash disbursements: $70,000
Beginning cash balance: $5,000
Minimum cash balance desired: $40,000
To determine the cash surplus or shortfall, we can perform the following steps:
Calculate the net cash flow by subtracting expected cash disbursements from expected cash receipts.
Add the beginning cash balance to the net cash flow.
Compare the result to the minimum cash balance desired.
If the result is less than the minimum cash balance, then the difference is the amount the company needs to borrow.
By following these steps, we find:
Net cash flow = $80,000 (receipts) - $70,000 (disbursements) = $10,000
Total cash available at the end of the period = $10,000 + $5,000 (beginning balance) = $15,000
The total cash available is less than the minimum cash balance desired.
The company needs to borrow = $40,000 (minimum desired) - $15,000 (end balance) = $25,000
Therefore, the correct answer is b. $25,000.