Answer:
Deficiency of cash for the month of October = $7,000
Explanation:
Opening cash = $7,000
Add: Expected cash collections = $350,000
Total cash in hand expected = $357,000
Less: Cash disbursements
Direct Material = $62,000
Direct Labor = $45,000
MOH Disbursements = $43,000
Operating Expense = $85,000
Capital Expense = $125,000
Total cash disbursements = $360,000
Net balance expected = $357,000 - $360,000 = $3,000 deficit.
Also provided month end balance should be $5,000
Therefore total deficit = $3,000 + $5,000 = $8,000
Now provided $1,000 cash can be borrowed in that case net deficit = $8,000 - $1,000 = $7,000