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28 September, 09:07

Western Company is preparing a cash budget for June. The company has $10,100 cash at the beginning of June and anticipates $31,900 in cash receipts and $38,300 in cash disbursements during June. Western Company has an agreement with its bank to maintain a minimum cash balance of $10,000. As of May 31, the company owes $15,000 to the bank. To maintain the $10,000 required balance, during June the company must: a. Repay $6,300. b. Borrow $6,300. c. Repay $3,700. d. Borrow $6,400. e. Borrow $10,000.

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Answers (2)
  1. 28 September, 10:09
    0
    b. Borrow $6,300

    Explanation:

    To calculate the required balance to maintain $10,000 required balance, we will first calculate the current balance in the account.

    The company has $10,100 at the beginning of June + anticipates $31,900 in cash receipts - $38,300 in cash disbursements during June.

    $10,100 + $31,900 - $38,300 = $3,700 is the amount in the account.

    Now we will calculate the amount required for the company to maintain a balance of $10,000.

    $10,000 - $3,700 = $6,300

    Western Company needs to borrow $6,300 in order to maintain the $10,000 required balance.
  2. 28 September, 12:42
    0
    Borrow $6,300.

    Explanation:

    The company has $10,100 cash at the beginning of June

    and anticipates $31,900 in cash receipts

    and $38,300 in cash disbursements during June.

    This gives a positive balance of (10,100 + 31,900 - 38,300) $3,700 and

    To maintain the $10,000 required balance, during June the company must:Borrow $6,300.
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