Uncle's Caps,Inc.,a merchandising company,has provided the following budgeted amounts for the next budget period. $$\begin{array} { | l | r | }
\hline \text { Beginning cash balance } & \$ 30,400 \
\hline \text { Cash collections } & 683,000 \
\hline \text { Payments for: } & \
\hline \text { Purchases of merchandise inventory } & 349,500 \
\hline \text { Selling and administrative expenses } & 70,400 \
\hline \text { Capital expenditures } &88,900\
\hline
\end{array}$$ 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,Inc.,a merchandising company,has provided the following budgeted amounts for the next budget period. $$\begin{array} { | l | r | } 
\hline \text { Beginning cash balance } & \$ 30,400 \
\hline \text { Cash collections } & 683,000 \
\hline \text { Payments for: } &  \
\hline \text { Purchases of merchandise inventory } & 349,500 \
\hline \text { Selling and administrative expenses } & 70,400 \
\hline \text { Capital expenditures } &88,900\
\hline 
\end{array}$$ 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

The ending cash balance is calculated as follows: Beginning cash balance + Cash collections - Payments for purchases of merchandise inventory - Payments for selling and administrative expenses - Payments for capital expenditures = Ending cash balance before minimum requirement. So, $30,400 + $683,000 - $349,500 - $70,400 - $88,900 = $204,600. Since a minimum cash balance of $250,000 is required, the company needs to borrow $45,400 to meet this requirement. However, since the company can only borrow in increments of $10,000, it will actually borrow $50,000 to meet the minimum requirement and adhere to the borrowing increments policy. Therefore, the ending cash balance after borrowing will be $204,600 + $50,000 = $254,600.

Uncle's Caps,Inc A Minimum Cash Balance of $250,000 Is Required to Be