Question

1) 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	$	350,000	$	470,000	$	400,000	$	420,000
Total cash disbursements	$	393,000	$	363,000	$	353,000	$	373,000

The company’s beginning cash balance for the upcoming fiscal year will be $20,000. 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.)

Garden Depot Cash Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Beginning cash balance Total cash receipts Total cash available Total cash disbursements Excess of cash available over disbursements Financing 0 0 0 0 C C 0 0 0 Borrowings 0 Repayments 0 Interest 0 Total financing 0 0 Ending cash balance 0 0 0 C 0

2) A cash budget, by quarters, is given below for a retail company (000 omitted). The company requires a minimum cash balance of at least $4,000 to start each quarter. Fill in the missing amounts. (Enter your answers in thousands of dollars. Cash deficiencies and Repayments should be indicated by a minus sign.)

Answer 1

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AS FOR GIVEN DATA...

(1)

Answer.

Garden Depot
Cash Budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Beginning cash balance	$20,000	$10,000	$      82,020	$      129,020	20000
Total cash receipts	350,000	470,000	400,000	420,000	1,640,000
Total cash available	370,000	480,000	482,020	549,020	1,881,040
Less total cash disbursements	393,000	363,000	353,000	373,000	1,482,000
Excess of cash available over disbursements	-23,000	117,000	129,020	176,020	399,040
Financing:
Borrowings	33,000	0	0	0	33,000
Repayments	0	-33,000	0	0	-33,000
Interest	0	-1,980	0	0	-1,980
Total financing	33,000	-34,980	0	0	-1,980
Ending cash balance	$10,000	$82,020	$129,020	$176,020	$176,020

(2)

			Q1	Q2	Q3	Q4	Year
Cash budget:
Cash Balance Beginning			7	4	4	4	7
Cash collection from customer			82	96	109	105	392
Total Available cash			89	100	113	109	399
Less: Disbursement
Purchase of inventory			48	58	51	32	189
Selling and admin expense			30	45	30	22	127
Equipment purchase			11	9	23	10	53
Dividends			2	2	2	2	8
Total disbursement			91	114	106	66	377
Excess (Deficiency)			-2	-14	7	43	22
Financing:
Borrowings			6	18			24
Repayments including Interest					-3	-22	-25
Total financing			6	18	-3	-22	-1
Cash Balance, ending			4	4	4	21	21

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