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	$	250,000	$	400,000	$	280,000	$	300,000
Total cash disbursements	$	309,000	$	279,000	$	269,000	$	289,000

The company’s beginning cash balance for the upcoming fiscal year will be $34,000. 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				34,000	10,000	93,900	104,900	34,000
total cash receipts				250,000	400,000	280,000	300,000	1,230,000
total cash available				284,000	410000	373900	404900	1,264,000
total cash disbursements				309,000	279,000	269,000	289,000	1,146,000
Excess of cash available over disbursement				-25,000	131,000	104,900	115,900	118,000
Financing:
Borrowings				35,000	0	0	0	35,000
Repayments				0	-35,000	0	0	-35,000
Interest				0	-2,100	0	0	-2,100
total financing				35,000	-37,100	0	0	-2,100
Ending cash balance				10,000	93,900	104,900	115,900	115,900
			interest = 35000*3%*2 qtrs
				2100