Muecke Inc. is working on its cash budget for April. The budgeted beginning cash balance is $40,000. Budgeted cash receipts total $150,000 and budgeted cash disbursements total $158,000. The desired ending cash balance is $50,000. To attain its desired ending cash balance for April, the company needs to borrow:

Question

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The company has a budgeted cash shortfall of $8,000 ($150,000 - $158,000), which means it will not have enough cash to achieve the desired ending cash balance of $50,000. Therefore, it needs to borrow an amount equal to the shortfall ($8,000) plus the difference between the desired ending cash balance and the beginning cash balance ($50,000 - $40,000). This comes out to be $18,000, which is option A.