Question

During September, the capital expenditure budget indicates a $520000 purchase of equipment. The ending September cash balance from operations is budgeted to be $67000. The company wants to maintain a minimum cash balance of $35000. What is the minimum cash loan that must be planned to be borrowed from the bank during September?

Answer 1

the minimum cash loan that must be planned to be borrowed is $418,000.

Step-by-step explanation:

The Cash Budget is prepared to highlight times for cash surpluses - allowing arrangements for investments of those surpluses to gain maximum return.

The Cash Budget also highlight times for Cash deficit - allowing for short term alternative sources of finance.

September Cash Budget Reconciliation :

Purchase of Equipment $520,000

Less Cash Balance ($67,000)

Less Minimum Cash Balance ($35,000)

Budgeted Loan Balance $418,000

Answer 2

$488,000

Step-by-step explanation:

He capital expenditure balance indicates a $520,000 purchase of equipment.

September ending cash balance is budgeted at $67,000

The company wants to maintain a minimum cash balance of $35,000

Therefore the minimum cash loan to be borrowed from the bank can be calculated as follows

= $520,000-$67,000+$35,000

= $488,000

Hence, the minimum cash loan that must be planned to be borrowed from the bank during September is $488,000