Uncle's Caps, a merchandiser, has provided the following budgeted amounts for the next budget period. $\begin{array}{|l|r|}
\hline \text { Balance of cash at the beginning } & \$ 30,000 \
\hline \text { Cash collections } & 680,000 \
\hline \text { Payments for: } & \
\hline \text { Purchase of inventory } &350,000 \
\hline \text { Selling and administrative expenses } & 70,400 \
\hline \text { Capital expenditures } &89,000\\hline
\end{array}$ A minimum cash balance of $250,000 is required to be maintained. The company can borrow in increments of $10,000 as and when required. Assume the company can borrow the needed funds at the end of the period. Calculate the ending cash balance for the budget period.

Question

Uncle's Caps, a merchandiser, has provided the following budgeted amounts for the next budget period. $\begin{array}{|l|r|}
\hline \text { Balance of cash at the beginning } & \$ 30,000 \
\hline \text { Cash collections } & 680,000 \
\hline \text { Payments for: } &  \
\hline \text { Purchase of inventory } &350,000 \
\hline \text { Selling and administrative expenses } & 70,400  \
\hline \text { Capital expenditures } &89,000\\hline
\end{array}$ A minimum cash balance of $250,000 is required to be maintained. The company can borrow in increments of $10,000 as and when required. Assume the company can borrow the needed funds at the end of the period. Calculate the ending cash balance for the budget period.

Quizplus · Accepted Answer

The ending cash balance is calculated as: Beginning cash balance + Cash collections - Payments for inventory - Selling and administrative expenses - Capital expenditures. This results in $30,000 + $680,000 - $350,000 - $70,400 - $89,000 = $200,600. Since the minimum cash balance required is $250,000, the company needs to borrow $50,000 to meet this requirement, resulting in an ending cash balance of $250,600.

Uncle's Caps, a Merchandiser, Has Provided the Following Budgeted Amounts