Answer:
During April the company will need to borrow $6,000
Explanation:
The company has a cash balance of $18,000 on April 1.
During the month, expected cash receipts are $98,000 and Cash disbursements are expected to total $112,000.
If Sparks Corporation does not borrow cash,
Cash balance on April 30 = $18,000 + $98,000 - $112,000 = $4,000
The company must maintain a minimum cash balance of $10,000, therefore,
Sparks will need to borrow: $10,000 - $4,000 = $6,000
Answer:
To maintain a cash balance of $10,000, Spark corporation must borrow $6,000.
Explanation:
Given
Cash balance on April 1 = $18,000
Minimum cash balance = $10,000
Cash receipts = $98,000.
Cash disbursements = $112,000
First, we need to calculate the ending cash balance;
Beginning Cash Balance $18,000
Add: Cash Receipts $98,000
Less: Cash Disbursements ($112,000)
Ending Cash Balance = $4,000
Ending Cash Balance = Beginning Cash Balance + Cash Receipts - Cash Disbursements
Ending Cash Balance = $18,000 + $98,000 - $112,000
Ending Cash Balance = $4,000
To maintain a cash balance of $10,000, Spark corporation must borrow:-
Let x represent the amount to borrow
x + $10,000 = $4000 --- Make x the subject of formula
x = $4,000 - $10,000
x = -$6,000
To maintain a cash balance of $10,000, Spark corporation must borrow $6,000.
The negative sign represents account deficit
