Southwest Outdoor Store will have cash receipts of $47,000 in November

Southwest Outdoor Store will have cash receipts of $47,000 in November and cash disbursements of $41,000 for this month. If its beginning cash is $7,000 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: C
Explanation: C) Its net cash flow for the month is cash receipts minus cash disbursements = $47,000 – $41,000 = $6,000. Its ending cash is net cash flow plus beginning cash = $6,000 + $7,000 = $13,000. Its excess is ending cash minus reserves = $13,000 – $4,000 = $9,000.