Expected monthly collection and disbursement information for the month of April

Question

Expected monthly collection and disbursement information for the month of April for Rayman Co. are shown below:

$ 45,000

37,000

70,000

2,000

4,000

The ending cash balance as of March 31 is budgeted to be 412,000. If a minimum cash balance of 410,000 is required, Raymar will:

a.Have excess cash of $8,000

b.Need to borrow $74,000

c.Need to borrow $62,000

d.Have excess cash of $45,000

Cash collections from Sales and Accounts Receivable

$ 45,000

Cash disbursements for Accounts Payable

37,000

Cash Disbursement for Payroll and Other Expenses

70,000

Interest Earned on the Savings Account

2,000

Dividends Paid

4,000

Explanation / Answer

Option C is the answer

Amount to be borrowed = Opening balance for the month + Cash collections - Cash disbursements - minimum balance required at the end of the month

= (412,000+45000+2000)-(37000+70000+4000)-410000

=459,000-111000-410000

=(62,000)

He needs to borrow $62,000

Ending cash balance of March is the opening cash balance of April

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