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 minimum cash loan that must be planned to be borrowed from the Bank during December is $30,000. This is because the company wants to maintain a minimum cash balance of $20,000, and the ending November cash balance is budgeted to be $40,000. Cash receipts are $840,000, and cash disbursements are $610,000 during December. So, the total cash available in December is $40,000 + $840,000 - $610,000 = $270,000. This is less than the desired minimum cash balance of $20,000, so the company must borrow $30,000 from the Bank to maintain the desired minimum cash balance.

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