During December, the capital budget indicates a $280,000 purchase of equipment for cash.The ending November cash balance is budgeted to be $40,000.Cash receipts are $840,000, and cash disbursements are $610,000 during December.The company wants to maintain a minimum cash balance of $20,000.What is the minimum cash loan that must be planned to be borrowed from the bank during December?

Question

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The calculation is as follows: Starting with the November ending cash balance of $40,000, add December's cash receipts of $840,000, and subtract both December's cash disbursements of $610,000 and the equipment purchase of $280,000. This results in a cash balance of ($40,000 + $840,000 - $610,000 - $280,000) = -$10,000. Since the company wants to maintain a minimum cash balance of $20,000, it needs to borrow $30,000 to both cover the shortfall and maintain the minimum balance.

During December, the Capital Budget Indicates a $280,000 Purchase of Equipment