Southern Company is preparing a cash budget for April. The company has $12,000 cash at the beginning of April and anticipates $30,000 in cash receipts and $34,500 in cash disbursements during April. Southern Company has an agreement with its bank to maintain a cash balance of at least $10,000. To maintain the $10,000 required balance, during April the company must:

Question

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To maintain a minimum balance of $10,000, Southern Company needs to have at least $10,000 cash at the end of April. 
Beginning cash balance = $12,000 
Total cash receipts = $30,000 
Total cash disbursements = $34,500 
Net cash flow = $30,000 - $34,500 = -$4,500 
Ending cash balance without borrowing = $12,000 - $4,500 = $7,500 
Since the ending cash balance without borrowing is less than the required minimum of $10,000, Southern Company needs to borrow an amount that will bring its ending cash balance to at least $10,000. 
Borrowing = $10,000 - $7,500 = $2,500 
Therefore, the company must borrow $2,500.

Southern Company Is Preparing a Cash Budget for April