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 a cash balance of $60,000. After adding total cash receipts of $250,000 and subtracting total cash disbursements of $245,000, the cash balance would be $65,000 ($60,000 + $250,000 - $245,000). The purchase of machinery by signing a note does not affect the cash balance, and the net income figure is not directly relevant to the cash balance calculation. Since the ending cash balance of $65,000 is above the minimum required balance of $34,000, Sultan does not need to borrow any money.

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