Question

Problem 2

Scrubs and Beyond Incorporated is a retailer of brand name scrubs, shoes and nursing accessories for fashion forward medical professionals. The company 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	$340,000	$670,000	$410,000	$470,000
Total cash disbursements	$530,000	$450,000	$430,000	$$480,000

The company’s beginning cash balance for the upcoming fiscal year will be $50,000. The company requires a minimum cash balance of $30,000 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.

Required:

Prepare the company’s cash budget for the upcoming fiscal year (complete the table below).

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Cash - beginning balance
Total cash receipts
Total cash available
Less: cash disbursements
Excess (deficiency) of cash
Borrowings
Repayments: Principal
Interest
Cash - ending balance

Answer 1

	1Quarter	2ndQuarter	3rdQuarter	4thQuarter	Total
Cash - beginning balance	50000	30000	69800	49800	50000
Total cash receipts	340000	670000	410000	470000	1890000
Total cash available	390000	700000	479800	519800	1940000
Less: cash disbursements	530000	450000	430000	480000	1890000
Excess (deficiency) of cash	(140000)	250000	49800	39800	50000
Borrowings
Repayments: Principal	170000	(170000)	0	0	0
Interest	0	(10200)	0	0	(10200)
Cash - ending balance	30000	69800	49800	39800	39800