American Company is preparing a cash budget for July. The company has $11,000 ca

Question

American Company is preparing a cash budget for July. The company has $11,000 cash at the beginning of July and anticipates $31,500 in cash receipts and $37,500 in cash disbursements during July. American Company has an agreement with its bank to maintain a cash balance of at least $10,000. As of June 30, the company owes $35,000 to the bank. To maintain the $10,000 required balance, during July the company must:

a) Borrow $10,000

b) Do nothing as they have the required minimum

c) Borrow $6,000

d) Repay $5,000

e) Borrow $5,000

Explanation / Answer

cash with company at end of july= 11,000+31,500-37,500 = $4,000

minimum required=$10,000

required money = $6,000

answer is C

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