Answer:
The company must borrow $144000
Explanation:
The required ending cash balance is the balance that the company should have at the end of the period. The decision to borrow will be taken by comparing the actual ending balance with the required ending balance. If the actual ending balance is less than the required ending balance, only then the company needs to borrow to reach the desired level of ending balance.
The actual ending balance can be calculated as,
Actual Ending balance = Opening Balance + Cash receipts - Cash disbursements
Actual Ending balance = 126000 + 870000 - 1020000
Actual Ending balance = - $24000
Difference = -24000 - 120000 = - $144000
As the ending cash balance is negative ( - $24000) which means that there is a shortage of cash and the company does not have enough cash to meet the disbursements for the period and maintain the required ending cash balance. The negative sign in difference indicates shortage and the need for borrowing. The company should borrow for the amount of difference. Thus, the company should borrow $144000
