Ask Question
2 March, 11:54

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 disbursements 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:A. $0. B. $10,000. C. $6,700. D. $7,000. E. $27,700.

+2
Answers (1)
  1. 2 March, 12:16
    0
    C. $6,700.

    Explanation:

    First we calculate the net cash flow in August

    Estimated cash receipt = $120,800

    Estimated cash disbursement = $134,500

    Net cash flow = $120,800 inflow - $134,500 outflow = $13,700 outflow

    Now calculate the closing cash balance = Opening Cash balance + net cash flow during the period = $17,000 - $13,700 = $3,300

    Limit for minimum cash balance = $10,000

    Cash need to be borrowed = $10,000 - $3,300 = $6,700

    Company need to borrow $6,700 to maintain the cash balance of $10,000
Know the Answer?
Not Sure About the Answer?
Find an answer to your 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 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers