Question

Stern Corporation’s management wants to maintain a minimum monthly cash balance of $8,000. At the beginning of September, the cash balance is $12,270, expected cash receipts for September are $97,200, and cash disbursements are expected to be $115,000. How much cash, if any, must Stern borrow to maintain the desired minimum monthly balance? Determine your answer by using the basic form of the cash budget. (Enter negative amounts using either a negative sign preceding the

Answer 1

Answer:

= $13,530

Explanation:

The cash budgets  shows the expected cash payment and expected cash receipts and cash balance at the end of a particular period.

Note that in the cash  budgeted only items of  cash are considered, therefore items like depreciation, amortization of intangible assets and apportionment of fixed cost are not included because they are not cash based.

The balance at the end = opening cash balance + cash receipts -cash payment

Applying this to Stern Corporation

Expected cash balance = 12,270 + 97,200 - 115,000

                                     = -5530

To maintain a cash balance of $8000, the company would have to borrow:

= 8000 + 5,530

= $13,530