Amount to Borrow Calculation for Sheffield Corp

How much does Sheffield Corp need to borrow if they have a beginning cash balance of $50,000 and require an ending cash balance of $44,000?

A. $84,000

B. $150,000

C. $44,000

D. $94,000

Answer:

The correct amount that Sheffield Corp needs to borrow is $94,000.

Sheffield Corp needs to borrow $94,000 in order to maintain an ending cash balance of $44,000. To calculate the amount to borrow, we need to follow the following steps:

Step 1: Calculate the cash balance

Beginning cash balance = $50,000

Cash receipts = $270,000

Cash disbursements = $370,000

Cash balance = Beginning cash balance + Cash receipts - Cash disbursements

Cash balance = $50,000 + $270,000 - $370,000

Cash balance = -$50,000

Step 2: Calculate the amount to borrow

Ending cash balance = $44,000

Amount to borrow = Ending cash balance + Cash balance

Amount to borrow = $44,000 + $50,000

Amount to borrow = $94,000

Therefore, Sheffield Corp must borrow $94,000 to meet their cash flow requirements.