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 $ 330,000 $ 450,000 $ 380,000 $ 400,000

Total cash disbursements $ 379,000 $ 349,000 $ 339,000 $ 359,000

The company’s beginning cash balance for the upcoming fiscal year will be $22,000. 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.)

Show all details to explain how to get each number.

Answer 1

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Garden Depot cash Bidget 2nd Qartey Year stQuarteY "Avertey Quaytey Beginming cash balance Total cash Yeceipts 10,000 $112/760 $22, 0o0 $aa,000 $71/780 车400 DOD |$1560, 000 $3 30,000 450,000 $380,000 Total Cash available $160,000 5121780 1,582000 $ 352,000 $4S1,780 Less: Total Cash dis bur serments $339,000 359,c00$1,126,000 $349,000 $399,000 Excess ot cash available ovey disbursements $27,000 $ 112/780 $11,000 $156,000 $153,780 Finon cing Bo rouings 37,000 $37,000 Re payments -537,000 - $37,000 Jnterest - $2220 $2220 Total inancing - $39,220 $0. $0 $2220 Ending cash balance $1,780 $10,000 $112,780 153,780 $153780 Since the defiaenay of cash availab le over di's bur se ment is $37,000 he campany must borow he desied ending Jnteres Jo maindain $37,000 X 3% X2 222לo cash balane キ000 10,000