The following information was taken from Southgate Industry's cash budget for the month of July: $\begin{array}{lr}
\text { Beginning cash balance } & \$ 480,000 \
\text { Cash receipts } & 304,000 \
\text { Cash disbursements } & 544,000
\end{array}$ If the company has a policy of maintaining a minimum end of the month cash balance of $400,000, the amount the company would have to borrow is
A)$160,000.
B)$80,000.
C)$240,000.
D)$96,000.

Question

Quizplus · Accepted Answer

The ending cash balance without borrowing would be $240,000 ($480,000 + $304,000 - $544,000). To maintain a minimum balance of $400,000, the company needs to borrow $160,000 ($400,000 - $240,000).

The Following Information Was Taken from Southgate Industry's Cash Budget