Question

Tomo, Inc. has prepared its third quarter budget and provided the following data:: Jul Aug SepCash collections $50,000 $39,600 $46,100Cash payments: Purchases of direct materials 30,000 21,700 17,600Operating expenses 12,300 8,000 11,600Capital expenditures 13,700 24,300 0The cash balance on June 30 is projected to be $4500. The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 whenever there is surplus cash. How much will the company have to borrow at the end of July?

Answer 1

Answer:

The firm will needto borrow 6,500 to achieve their minimum cahs balance and pay  their budgeted expenditures

Explanation:

                       July

beginning          $     4,500

receipts                  $   50,000

disbursement+  $  (56,000)*

subtotal                  $     (1,500)

minimun                         $5,000

Financing needs: 5000 - (-1500)  = 6,500

payment/loan  $6,500

*sum of cash payment for purchase of materials, operating expenses and capital expenditures