Sultan Sundries must maintain a minimum cash balance of $34,000. At the beginning of February the company's cash balance was $60,000. The budget for February is as follows: $$\begin{array} { l r }
\text { Total cash receipts } & \$ 250,000 \
\text { Total cash disbursements } & \$ 245,000 \
\text { Net income } & \$ 50,000 \
\text { Purchase machinery by signing a note } & \$ 35,000
\end{array}$$ During February, how much will Sultan need to borrow?

Question

Sultan Sundries must maintain a minimum cash balance of $34,000. At the beginning of February the company's cash balance was $60,000. The budget for February is as follows: $$\begin{array} { l r } 
\text { Total cash receipts } & \$ 250,000 \
\text { Total cash disbursements } & \$ 245,000 \
\text { Net income } & \$ 50,000 \
\text { Purchase machinery by signing a note } & \$ 35,000
\end{array}$$ During February, how much will Sultan need to borrow?

Quizplus · Accepted Answer

Sultan Sundries starts with $60,000 and expects net cash inflow of $5,000 ($250,000 receipts - $245,000 disbursements). This results in an ending cash balance of $65,000, which is above the minimum required balance of $34,000. Therefore, no borrowing is needed.

Sultan Sundries Must Maintain a Minimum Cash Balance of $34,000