Uncle's Caps, a merchandiser, has provided the following budgeted amounts for the next budget period. A minimum cash balance of $250,000 is required to be maintained. The company can borrow in increments of $10,000 as and when required. Assume the company can borrow the needed funds at the end of the period. Calculate the ending cash balance for the budget period.

Question

Uncle's Caps, a merchandiser, has provided the following budgeted amounts for the next budget period.  A minimum cash balance of $250,000 is required to be maintained. The company can borrow in increments of $10,000 as and when required. Assume the company can borrow the needed funds at the end of the period. Calculate the ending cash balance for the budget period.

Quizplus · Accepted Answer

We can create a cash budget using the information provided:

Beginning Cash Balance: $300,000
Add: Total Receipts: $590,000
Total Cash Available: $890,000
Less: Total Disbursements: $640,400
Required Minimum Balance: $250,000

Excess (Deficiency) of Cash Available Over Disbursements and Required Minimum Balance: -$400

Since Uncle's Caps can borrow in increments of $10,000, they can easily borrow enough to cover this small deficiency. Therefore, the ending cash balance would be the required minimum balance of $250,000. Option B is the correct answer.

Uncle's Caps, a Merchandiser, Has Provided the Following Budgeted Amounts