For April, Anderson Antiques will have cash receipts of $365,000 and cash disbursements of $370,000. If its beginning cash is $4,000 and its desired reserve is $3,000, what will be its shortfall in cash for the month?
A) There is no shortfall in cash but an excess of cash.
B) -$3,000
C) -$4,000
D) -$5,000
Answer: C
Explanation: C) Its net cash flow for the month is cash receipts minus cash disbursements = $365,000 - $370,000 = -$5,000. Its ending cash is net cash flow plus beginning cash = -$5,000 + $4,000 = -$1,000. Its short-fall is ending cash minus reserves = -$1,000 - $3,000 = -$4,000.
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