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Western Company is preparing a cash budget for June. The company has $12,000 in cash at the beginning of June and anticipates $30,000 in cash receipts and $34,500 in cash payments 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 has no loans outstanding. To maintain the $10,000 required balance, during June the company must: Multiple Choice Borrow $4,500. Borrow $2,500. Borrow $10,000. Repay $7,500. Repay $2,500.

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kaancceylan

Answer:

The answer is option B.

Explanation:

The company has $12,000 in cash and are expected to pay $34,500 in cash in June. Since they will be receiving $30,000 in cash receipts, that makes a total of $42,000 in the account.

If they pay the $34,500, that leaves $7,500 in the account so to maintain the $10,00 cash balance in the account according to their agreement, the company must borrow $2,500. So the answer is option B.

I hope this helps.

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