Webster Corporation is preparing its cash budget for April. The March 31 cash balance is $36,400. Cashreceipts are expected to be $641,000 and cash payments for purchases are expected to be $608,500.Other cash expenses expected are $27,000 selling and $33,500 general and administrative. The companydesires a minimum cash balance at the end of each month of $30,000. If necessary, the companyborrows enough cash to meet the minimum using a short-term note. The amount Webster must borrowduring April is:A) $0.B) $21,600.C) $8,400.D) $98,900.E) $58,000.

Webster Corporation

Amount to borrow in April

B) $21,600.

Explanation:

a) Webster Corporation

Cash Budget for the month of April

Beginning Cash balance    $36,400

Cash receipts                      641,000

Total receipts                     $677,400

Cash expenses:

Purchases        $608,500

Others                  27,000

Selling & Admin.  33,500  669,000

Balance                                   8,400

Borrowing                             21,600

Minimum cash balance     $30,000

b) Webster's cash budget for April shows that it needs to borrow $21,600 in order to meet the minimum cash balance of $30,000.  This is because the company does not generate enough cash in April to pay for expenses and meet minimum requirements for cash balance every month.  The preparation of Webster Corporation's Cash Budget is a way of planning for the occurrence of the cash shortage that necessitated the borrowing.

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