Question

Garden Depot is a retailer that is preparing its budget for the upcoming fiscal year. Management...

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 $ 360,000 $ 480,000 $ 410,000 $ 430,000 Total cash disbursements $ 400,000 $ 370,000 $ 360,000 $ 380,000 The company’s beginning cash balance for the upcoming fiscal year will be $18,000. 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. (Cash deficiency, repayments and interest should be indicated by a minus sign.)

Homework Answers

Answer #1
Garden Depot
Cash Budget
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Beginning cash balance 18000 10000 86080 136080 18000
Total cash receipts 360000 480000 410000 430000 1680000
Total cash available 378000 490000 496080 566080 1698000
Less total cash disbursements 400000 370000 360000 380000 1510000
Excess of cash available over disbursements -22000 120000 136080 186080 188000
Financing:
Borrowings 32000 0 0 0 32000
Repayments 0 -32000 0 0 -32000
Interest 0 -1920 0 0 -1920
Total financing 32000 -33920 0 0 -1920
Ending cash balance 10000 86080 136080 186080 186080
Interest = 32000*3%*2 = $1920
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