Question

Pancake Castle will have cash receipts of​ $75,000 in June and cash disbursements of​ $40,000 for this month. If its beginning cash is​ $8,000 and its desired reserve is​ $10,000, what will its excess be for​ April?

A.There is no excess but a shortfall.
B.​$33,000
C.​$8,000
D.​$25,000

Answer 1

The excess cash for April at the end is $33000. So option B is the correct answer.

Step-by-step explanation:

The excess is the additional cash held at the year end in addition to the desired reserve. The ending cash balance can be calculated as,

Ending cash balance = Opening cash balance + Cash Receipts for the month - Cash payments for the month

Ending cash balance = 8000 + 75000 - 40000 = $43000

Out of the $43000 ending cash balance, the desired reserve is $10000. Thus,, the excess cash for April is,

Excess cash = 43000 - 10000 = $33000