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2 July, 03:35

Santos Co. is preparing a cash budget for February. The company has $12,000 cash at the beginning of February and anticipates $71,000 in cash receipts and $114,000 in cash disbursements during February. What amount, if any, must the company borrow during February to maintain a $5,000 cash balance? The company has no loans outstanding on February 1.

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  1. 2 July, 03:56
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    The $26,000 is the borrowed amount during February month

    Explanation:

    For calculating the borrowed amount, first we have to compute the cash available for use and cash payment.

    So,

    Cash available for use is equals to

    = Beginning balance + Cash receipts

    = $12,000 + $71,000

    = $83,000

    And, the cash disbursement is $114,000

    So the balance is equals to

    = Cash disbursement - cash available for use

    = $114,000 - $83,000

    = $31,000

    And the maintain balance is $5,000

    So, the borrowed amount is equal to

    = Total balance available - maintain balance

    = $31,000 - $5,000

    = $26,000

    Hence, the $26,000 is the borrowed amount during February month
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