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:

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 a 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

	Garden Depot
	Cash Budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Beginning cash balance	22000	10000	71780	112780	22000
Total cash receipts	330000	450000	380000	400000	1560000
Total cash available	352000	460000	451780	512780	1582000
Total cash disbursements	379000	349000	339000	359000	1426000
Excess of cash available over disbursements	-27000	111000	112780	153780	156000
Financing:
Borrowings	37000	0	0	0	37000
Repayments	0	-37000	0	0	-37000
Interest	0	-2220	0	0	-2220
Total financing	37000	-39220	0	0	-2220
Ending cash balance	10000	71780	112780	153780	153780
Interest = 37000*3%*2 = $2220