Pearson Advising will have cash receipts of $35,000 in April and cash disbursements of $30,000 for this month.If its beginning cash is $5,000 and its desired reserve is $2,000,what will its excess be for April?

Question

Quizplus · Accepted Answer

Beginning cash balance = $5,000
Cash receipts = $35,000
Cash disbursements = $30,000
Desired reserve = $2,000

Net cash flow = Cash receipts - Cash disbursements = $35,000 - $30,000 = $5,000
Ending cash balance before reserve = Beginning cash balance + Net cash flow = $5,000 + $5,000 = $10,000
Ending cash balance after reserve = Ending cash balance before reserve - Desired reserve = $10,000 - $2,000 = $8,000

Therefore, the excess cash for April is $8,000.

Pearson Advising Will Have Cash Receipts of $35,000 in April