Question

Webster Corporation is preparing its cash budget for April. The March 31 cash balance is $36,400. Cash receipts are expected to be $641,000 and cash payments for purchases are expected to be $608,500. Other cash expenses expected are $27,000 selling and $33,500 general and administrative. The company desires a minimum cash balance at the end of each month of $30,000. If necessary, the company borrows enough cash to meet the minimum using a short-term note. Webster's preliminary cash balance before loan activity for April is expected to be:A. $8,400.B. $21,600.C. $30,000.D. ($28,000).E. $68,900.

Answer 1

Answer:

A. $8,400.

Explanation:

The preliminary cash balance before loan activity is the net of the cash outflows and cash inflows added to the cash balance at the start of the period.

The outflows are negative as they reduce cash balance while the inflows are positive as they increase cash balance.

preliminary cash balance before loan activity

= $36,400 + $641,000 - $608,500 - $27,000 - $33,500

= $8,400