Great Skot expects to have cash receipts in June of $532,160. Skot's cash disbursements in June are $581,720, including an interest payment on a bond issue of $32,000. If Skot wishes to maintain a cash balance of $40,000, how much will Skot need to borrow if it started the month with a cash balance of $52,000?

Question

Quizplus · Accepted Answer

Starting cash balance = $52,000
Cash receipts = $532,160
Total cash available = $584,160

Cash disbursements = $581,720
Interest payment = $32,000
Total cash needed = $613,720

Minimum desired cash balance = $40,000
Total cash needed including minimum desired balance = $653,720

So, Skot will need to borrow:

$653,720 - $584,160 = $69,560

Therefore, the answer is D - Skot will need to borrow $37,560.

Great Skot Expects to Have Cash Receipts in June of $532,160