A company is preparing its their Cash Budget. The following data has been provided for cash receipts and payments. The company's cash balance at January 1st is $290,000. This company desires a minimum cash balance of $340,000.
What is the amount of excess cash or deficiency of cash (after considering the minimum cash balance required) for February?

Question

A company is preparing its their Cash Budget. The following data has been provided for cash receipts and payments.  The company's cash balance at January 1st is $290,000. This company desires a minimum cash balance of $340,000.
What is the amount of excess cash or deficiency of cash (after considering the minimum cash balance required) for February?

Quizplus · Accepted Answer

To determine the excess cash or deficiency for February, we need to calculate the total cash receipts and payments for the month and then subtract the minimum cash balance required.

Total cash receipts for February: $650,000 + $500,000 = $1,150,000
Total cash payments for February: $400,000 + $300,000 + $350,000 + $500,000 = $1,550,000

Net cash flow for February: $1,150,000 - $1,550,000 = -$400,000 (deficiency)

Minimum cash balance required: $340,000

Excess cash or deficiency for February: -$60,000 (deficiency)

Therefore, the closest answer is C, which indicates a deficiency of $900.

A Company Is Preparing Its Their Cash Budget