Bookworm Publishers publishes books and they have gathered the following data for the month of October: Bookworm Publishers requires an ending cash balance of at least $5,000 and can borrow from a line of credit in $1,000 increments. How much cash is available for October?

Question

Bookworm Publishers publishes books and they have gathered the following data for the month of October:  Bookworm Publishers requires an ending cash balance of at least $5,000 and can borrow from a line of credit in $1,000 increments. How much cash is available for October?

Quizplus · Accepted Answer

To calculate the available cash for the month of October, we need to start with the beginning balance of $75,000 and add the cash receipts ($253,000) and subtract the cash disbursements ($283,000). This gives us:

Beginning balance: $75,000
+ Cash receipts: $253,000
- Cash disbursements: $283,000
= Ending balance before borrowing: $45,000

Since the company requires an ending cash balance of at least $5,000, they need to borrow $40,000 from their line of credit. The available cash is therefore:

Ending balance before borrowing: $45,000
+ Line of credit borrowed: $40,000
= Available cash: $85,000

Therefore, the best choice is B.

Bookworm Publishers Publishes Books and They Have Gathered the Following