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	$	280,000	$	400,000	$	330,000	$	350,000
Total cash disbursements	$	344,000	$	314,000	$	304,000	$	324,000

The company’s beginning cash balance for the upcoming fiscal year will be $45,000. 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 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	$	280,000	$	400,000	$	330,000	$	350,000
Total cash disbursements	$	344,000	$	314,000	$	304,000	$	324,000

The company’s beginning cash balance for the upcoming fiscal year will be $45,000. 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 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	$	280,000	$	400,000	$	330,000	$	350,000
Total cash disbursements	$	344,000	$	314,000	$	304,000	$	324,000

The company’s beginning cash balance for the upcoming fiscal year will be $45,000. 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				45,000	10,000	65,260	91,260	45,000
total cash receipts				280,000	400,000	330,000	350,000	1,360,000
total cash available				325,000	410000	395260	441260	1,405,000
total cash disbursements				344,000	314,000	304,000	324,000	1,286,000
Excess of cash available over disbursement				-19,000	96,000	91,260	117,260	119,000
Financing:
Borrowings				29,000	0	0	0	29,000
Repayments				0	-29,000	0	0	-29,000
Interest				0	-1,740	0	0	-1,740
total financing				29,000	-30,740	0	0	-1,740
Ending cash balance				10,000	65,260	91,260	117,260	117,260
			interest = 29000*3%*2 qtrs
				1740