Northwest Outdoor Store will have cash receipts of $83,000 in December

Northwest Outdoor Store will have cash receipts of $83,000 in December and cash disbursements of $78,000 for this month. If its beginning cash is $5,000 and its desired reserve is $4,000, what will its excess be for December?

A) There is no excess but a shortfall.
B) $6,000
C) $9,000
D) $13,000

ANSWER

Answer: B
Explanation: B) Its net cash flow for the month is cash receipts minus cash disbursements = $83,000 – $78,000 = $5,000. Its ending cash is net cash flow plus beginning cash = $5000 + $5,000 = $10,000. Its excess is ending cash minus reserves = $10,000 – $4,000 = $6,000.