Bantam Industries has budgeted the following information for March: If there is a cash shortage, the company borrows money from the bank. All cash is borrowed at the beginning of the month in $1,000 increments and interest is paid monthly at 1% on the first day of the following month. The company had no debt before March 1^st. How much cash will the company need to borrowed in March?

Question

Quizplus · Accepted Answer

Projected ending cash balance (before borrowing, if any) = Beginning cash balance + Cash receipts - Cash payments - Repayments
Projected ending cash balance (before borrowing, if any) = $5,000 + $271,000 - $280,000 = $(4,000)
Borrowing = Desired ending cash - Projected ending cash balance (before borrowing, if any)
Borrowing = $25,000 - $(4,000) = $25,000 + $4,000 = $29,000

Bantam Industries Has Budgeted the Following Information for March