Question

Garden Depot is a retailer that is preparing its budget for the upcoming fiscal year. Management has prepared the following summary of its budgeted cash flows:

	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
Total cash receipts	$	340,000	$	460,000	$	390,000	$	410,000
Total cash disbursements	$	386,000	$	356,000	$	346,000	$	366,000

The company’s beginning cash balance for the upcoming fiscal year will be $24,000. The company requires a minimum cash balance of $10,000 and may borrow any amount needed from a local bank at a quarterly interest rate of 3%. The company may borrow any amount at the beginning of any quarter and may repay its loans, or any part of its loans, at the end of any quarter. Interest payments are due on any principal at the time it is repaid. For simplicity, assume that interest is not compounded.

Required:

Prepare the company’s cash budget for the upcoming fiscal year. (Repayments, and interest, should be indicated by a minus sign.)

Answer 1

				1st qtr	2nd qtr	3rd quarter	4 th qtr	year
Beginning cash balance				24,000	10,000	80,080	124,080	24,000
total cash receipts				340,000	460,000	390,000	410,000	1,600,000
total cash available				364,000	470000	470080	534080	1,624,000
total cash disbursements				386,000	356,000	346,000	366,000	1,454,000
Excess of cash available over disbursement				-22,000	114,000	124,080	168,080	170,000
Financing:
Borrowings				32,000	0	0	0	32,000
Repayments				0	-32,000	0	0	-32,000
Interest				0	-1,920	0	0	-1,920
total financing				32,000	-33,920	0	0	-1,920
Ending cash balance				10,000	80,080	124,080	168,080	168,080
			interest = 32000*3%*2 qtrs
				1920