The following information was taken from Wildhorse Co. cash budget for the month of July: Beginning cash balance $135000 Cash receipts 130000 Cash disbursements 184000 If the company has a policy of maintaining an end of the month cash balance of $135000, the amount the company would have to borrow is

Question

Business

Savanna Liu

5 January, 05:20

The following information was taken from Wildhorse Co. cash budget for the month of July: Beginning cash balance $135000 Cash receipts 130000 Cash disbursements 184000 If the company has a policy of maintaining an end of the month cash balance of $135000, the amount the company would have to borrow is

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Vaughn Faulkner · Answer 1

amount borrowed = $54,000

Explanation:

in order to solve this, let us calculate the net cash balance as a result of the transaction activities first, and this is calculated as follows:

beginning cash balance = $135,000

cash receipts = $ 130,000

cash disbursements = $ 184,000

Net cash = beginning cash balance + cash receipt - Cash disbursement = 135,000 + 130,000 - 184,000 = $81,000

Next, we are told that there was an ending cash balance of $135,000, therefore, amount borrowed is calculated as follows:

ending cash balance = net cash balance from activities + borrowed cash

135,000 = 81,000 + borrowed cash

∴ borrowed cash = 135,000 - 81,000 = $ 54,000

Therefore, the amount borrowed = $54,000