Question

Santos Co. is preparing a cash budget for February. The company has $12,000 cash at the beginning of February and anticipates $71,000 in cash receipts and $114,000 in cash disbursements during February. What amount, if any, must the company borrow during February to maintain a $5,000 cash balance? The company has no loans outstanding on February 1.

Answer 1

Answer:

The $26,000 is the borrowed amount during February month

Explanation:

For calculating the borrowed amount, first we have to compute the cash available for use and cash payment.

So,

Cash available for use is equals to

= Beginning balance + Cash receipts

= $12,000 + $71,000

= $83,000

And, the cash disbursement is $114,000

So the balance is equals to

= Cash disbursement - cash available for use

= $114,000 - $83,000

= $31,000

And the maintain balance is $5,000

So, the borrowed amount is equal to

= Total balance available - maintain balance

= $31,000 - $5,000

= $26,000

Hence, the $26,000 is the borrowed amount during February month