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. To maintain the minimum cash balance of $10,000, the company must borrow:

Answer 1

The Southland Company must borrow the amount of $6,700

Step-by-step explanation:

To determine the amount the company must borrow, analysis of its net cash balance is paramount. Then, the Net cash balance will be deducted from the minimum cash balance of $10,000 to know the amount to be borrowed

Particulars Amount

Opening Cash Balance $17,000

Cash Receipts Expected $120,800

Cash Payment $134,500

Net Cash Balance $3,300

Minimum cash balance $10,000

Net Cash Balance $3,300

Amount to be borrowed $6,700

The Southland Company must borrow the amount of $6,700