Question

Santos Co. is preparing a cash budget for February. The company has $18,000 cash at the beginning of February and anticipates $66,000 in cash receipts and $116,000 in cash disbursements during February. What amount, if any, must the company borrow during February to maintain a $5,000 cash balance? The company has no loans outstanding on February 1. (Negative cash balances, if any, should be indicated with minus sign.)

Answer 1

$5,000

Step-by-step explanation:

The computation of Ending Cash balance is shown below:-

Financing

Preliminary cash Balance = Beginning cash balance + Cash receipt - Cash Disbursement + Financing

= $18,000 + $66,000 - $116,000

= -$32,000

Financing = Preliminary cash Balance + Minimum Cash Balance Required

= $32,000 + $5,000

= $37,000

Ending cash balance = Financing - Preliminary cash Balance

= $37,000 - $32,000

= $5,000