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

Answer:

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

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