Question

Santos Co. is preparing a cash budget for February. The company has \(20,000 cash at the beginning of February and anticipates \)75,000 in cash receipts and \(100,250 in cash payments during February. What amount, if any, must the company borrow during February to maintain a \)5,000 cash balance? The company has no loans outstanding on February 1.

Short answer

The amount Santos Co. must borrow to maintain an ending balance of $5,000 is $10,250.

Step-by-step solution

Given the amounts as

Beginning cash balance of $20,000.

Cash receipts of $75,000.

Cash payments of $100,250.

Ending cash balance is $5,000.

Calculating the amount the company must borrow

Santos Co.
Cash budget
For February
Particulars	Amount
Beginning cash balance	$20,000
Add: Cash receipts	$75,000
Total cash	$95,000
Less: Cash payments	$100,250
Preliminary cash balance	($5,250)
Add: Additional loan	$10,250
Ending cash balance	$5,000