Stanley Company is preparing a cash budget for February. The company has $30,000 cash at the beginning of February and anticipates $75,000 in cash receipts and $96,250 in cash payments during February. Stanley Company has an agreement with its bank to maintain a cash balance of $10,000. What amount, if any, must the company borrow at the end of February to maintain a $10,000 cash balance?
What will be an ideal response?
| Cash balance, February 1 ……………………… | $30,000 |
| Add budgeted cash receipts ………….………… | 75,000 |
| Less budgeted cash payments …..…………… | (96,250) |
| Cash balance before financing …………………… | $ 8,750 |
| Required cash balance ……………….………… | 10,000 |
| Amount to be borrowed ………………………… | $ 1,250 |
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