The following information was reported in a cash budget: $\begin{array}{|l|c|}
\hline \text { Begining cash balance } & \$ 280,000 \
\hline \text { Cash payments } & 533,000 \
\hline \text { Cashreceipts } & 370,000 \
\hline \text { Minimum cash balance desired } & 200,000 \
\hline
\end{array}$
How much cash will the company have to borrow in order to meet its required needs?

Question

The following information was reported in a cash budget: $\begin{array}{|l|c|}
\hline \text { Begining cash balance } & \$ 280,000 \
\hline \text { Cash payments } & 533,000 \
\hline \text { Cashreceipts } & 370,000 \
\hline \text { Minimum cash balance desired } & 200,000 \
\hline
\end{array}$
 How much cash will the company have to borrow in order to meet its required needs?

Quizplus · Accepted Answer

To determine the amount the company needs to borrow, calculate the ending cash balance and compare it to the minimum desired cash balance. Beginning cash balance + Cash receipts - Cash payments = Ending cash balance. So, $280,000 + $370,000 - $533,000 = $117,000. Since the company desires a minimum cash balance of $200,000 and the ending balance is $117,000, the shortfall is $200,000 - $117,000 = $83,000. Therefore, the company needs to borrow $83,000.

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