The expected cash balance on April 30 would be:

Question

Quizplus · Accepted Answer

Calculate the net cash receipts for April: 
$240,000 (credit sales) + $10,000 (cash sales) - $110,000 (collections from credit sales in March) = $140,000.

Calculate the total cash disbursements for April: 
$85,000 (April rent and utilities) + $95,000 (April inventory purchases) + $35,000 (other April expenses) = $215,000.

Calculate the expected ending cash balance for April: 
Beginning cash balance ($35,000) + Net cash receipts for April ($140,000) - Total cash disbursements for April ($215,000) = $-40,000

Since the expected ending cash balance is negative, the company will need to borrow money or use its line of credit to cover expenses. The company's line of credit has a balance of $95,000, so the expected cash balance on April 30 would be:

Beginning cash balance ($35,000) + Net cash receipts for April ($140,000) - Total cash disbursements for April ($215,000) + Borrowed funds ($95,000) = $54,700.

The Expected Cash Balance on April 30 Would Be