23) 23) Delbert, Inc. has prepared its third quarter budget and provided the fol

Question

23) 23) Delbert, Inc. has prepared its third quarter budget and provided the following data Aug Sep $50,000$39,700 47,300 Cash collections Cash pavments Purchases of direct materials Operating expenses 30,000 21,500 12,400 13,400 24,500 17,800 11,500 0 8800 Capital expenditures The cash balance on June 30 is projected to be $4600. The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at t shortfalls. It may borrow in increments of $5,000 and has to pay interest every month at an annual rate of 4%. All financing transaction balance should be repaid in increments of $5,000 whenever there is surplus cash. How much will the company have to borrow at the end of July? s are assumed to take place at the end of the month. The loan A) $10,000 B) $15,000 C) $5,000 D) $0

Explanation / Answer

July opening cash balance 4,600 Cash collection 50,000 total cash receipts 54,600 Cash payments purchases of direct materials 30,000 operating expenses 12,400 Capital expenditures 13,400 total cash payments 55,800 excess of cash(deficiency) -1,200 financing Borrowing 10,000 Cash balance at year end 8800 option A) $10,000 answer (since the company has to maintain a minumum cash balance of $5000 , it needs to borrow above $5000 as he has to cover $1800 deficiency, together which is 6,800 .Since he can borrow in increments of $5000 so he need to borrow 10,000)

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