Question

Southland Company is preparing a cash budget for August. The company has $17,500 cash at the beginning of August and anticipates $121,800 in cash receipts and $135,500 in cash disbursements during August. Southland Company wants to maintain a minimum cash balance of $10,000. To maintain the minimum cash balance of $10,000, the company must borrow:

Answer 1

The company must borrow $6200

Step-by-step explanation:

To calculate the borrowing required, we need to determine the ending cash that will be available at the end of the August.

The ending cash balance will be,

Ending balance = Opening balance + Receipts - Payments/disbursements

Ending balane = 17500 + 121800 - 135500 = $3800

As the company requires to maintain $10000 minimum cash.

The company will need to borrow 10000 - 3800 = $6200