Question

Novak Corporation’s management wants to maintain a minimum monthly cash balance of $9,760. At the beginning of September, the cash balance is $14,969, expected cash receipts for September are $118,584, and cash disbursements are expected to be $140,300. How much cash, if any, must Novak borrow to maintain the desired minimum monthly balance? Determine your answer by using the basic form of the cash budget.

Answer 1

$16,507

Step-by-step explanation:

Given that,

Cash balance at the beginning of September = $14,969

Minimum cash balance to be maintained = $9,760

Expected cash receipts for September = $118,584

Expected cash disbursements = $140,300

Cash balance after disbursements:

= Cash balance at the beginning of September + Expected cash receipts - Expected cash disbursements

= $14,969 + $118,584 - $140,300

= -$6,747

Amount to be borrowed to maintain the desired minimum monthly balance:

= Minimum cash balance to be maintained - Cash balance after disbursements

= $9,760 - (-$6,747)

= $9,760 + $6,747

= $16,507