Question

Sales 22160 units Cash, beginning balance $34000 Selling and administrative (of which depreciation, $5,000) $53000 Required minimum cash balance $66480 If necessary, the company will borrow cash from a bank on the first day of March. Assume that the borrowing can be made in any (exact) amount, but bears interest at 3% per month. The March interest will be paid during subsequent months. Q: What is the closest amount of cash that must be borrowed on March 1 to cover all cash disbursements and to obtain the desired March 31 cash balance

Answer 1

Answer:

Loan taken:                           58,320

Explanation:

We add up the beginning cash with the receipts and subtract the expenses.

Then, we compare agaisnt the mnimum required balance

Beginning Cash   34,000

Cash Receipts

Sales                    22,160

Total cash form operations: 56,160

Cash disbursements

S&A expense (w/o depreciations) 48,000

Ending Cash from operations 8,160

Minimum Balance:               66,480  

Loan taken:                           58,320