Question

Southland Company is preparing a cash budget for August. The company has $17,000 cash at the beginning of August and anticipates $120,800 in cash receipts and $134,500 in cash payments during August. Southland Company wants to maintain a minimum cash balance of $10,000. The preliminary cash balance at the end of August before any loan activity is:

Answer 1

$3,300

Step-by-step explanation:

All the receipts during the period is added in the beginning cash balance and payments are deducted from it to arrive at the ending balance of the cash.

Cash budget for August

Beginning cash balance $17,000

Add: Cash Receipts $120,800

Total Cash available $137,800

Less: Cash Payments $134,500

Preliminary Cash Balance at year end $3,300

Add: Borrowing $6,700

Cash Balance $10,000

Southland Company wants to maintain cash balance of $10,000, so they need to borrow the residual amount of $6,700 ( $10,000 - $3,300).