On January 1 Witt Company has a beginning cash balance of $126000. During the year the company expects cash disbursements of $1020000 and cash receipts of $870000. If Witt requires an ending cash balance of $120000 Witt Company must borrow
A) $96000.
B) $120000.
C) $144000.
D) $276000.

Question

Quizplus · Accepted Answer

To determine the amount Witt Company must borrow, we need to calculate the expected cash balance at the end of the year:

Beginning Cash Balance + Cash Receipts - Cash Disbursements = Ending Cash Balance

$126,000 + $870,000 - $1,020,000 = Ending Cash Balance

Ending Cash Balance = -$24,000

Since Witt Company requires an ending cash balance of $120,000, they will need to borrow $144,000 ($120,000 - (-$24,000)). Therefore, the correct answer is C.

On January 1 Witt Company Has a Beginning Cash Balance