Question

Southland Company is preparing a cash budget for August. The company has $17,000 cash at the beginning of August and anticipates $120,800 in cash receipts and $134,500 in cash disbursements during August. Southland Company wants to maintain a minimum cash balance of $10,000. The preliminary cash balance at the end of August before any loan activity is:
A. $3,300.
B. $13,300.
C. $137,800.
D. $13,700.
E. $27,000.

Answer 1

Answer:

A. $3,300.

Explanation:

At the end of August, Southland Company had a cash balance of 17000+120800-134500 = $3,300.

Hence the company will have to take a loan of $6700(10000-3300) to be able to maintain the cash balance of $10,000.