Question

Speedy Runner makes running shoes and they have gathered the following data for the month of​ October: Data Cash on​ 10/1 ​$15,300 Expected Cash Collections ​$435,000 Direct Materials Cash Disbursements ​$80,000 Direct Labor Cash Disbursements ​$32,000 MOH Cash Disbursements ​$25,000 Operating Expenses Cash Disbursements ​$110,000 Capital Expenditures Cash Disbursements ​$200,000 Speedy Runner requires an ending cash balance of at least​ $12,000 and can borrow from a line of credit in​ $1,000 increments. How much will Speedy Runner need to borrow at the end of​ October?

Answer 1

$15,300

Step-by-step explanation:

The computation of the amount borrowed is shown below:

Beginning Cash Balance $15,300

Add: Expected cash collections $435,000

Total cash available $450,300 (a)

Less: Disbursements

Direct Material cash disbursements $80,000

Direct Labor cash disbursements $32,000

MOH cash disbursements $25,000

Operating expense cash disbursements $110,000

Capital Expenditure cash disbursements $200,000

Less: Total cash disbursement -$447,000 (b)

Amount left - $3,300 (a - b)

Borrowed amount is $15,300

Ending cash balance is $12,000

We simply add the collections and deduct the Disbursements ​ to the opening cash balance