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Assume a merchandising company provides the following information from its master budget for the month of May:

Cash balance, May 1 $20,000
Cash collections from customers $80,000
Cash disbursements for merchandise purchases $35,000
Cash disbursements for selling and administrative expenses $40,000

If the company wishes to maintain a minimum cash balance of $30,000 at the end of every month, then its borrowings at the beginning of May will equal:_______

a. $5,000
b. $0
c. $25.000
d. $20,000

Sagot :

Answer:

a. $5,000

Explanation:

The computation of the borrowing is shown below:

Cash balance, May 1 $20,000

Add: Cash collections from customers $80,000

Total cash available $100,000

Less:

Cash disbursements for merchandise purchases -$35,000

Cash disbursements for selling and administrative expenses -$40,000

Excess cash available $25,000

And, there is a minimum cash balance of $30,000

so we have to borrowed $5,000

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