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 | $ | 220,000 | $ | 370,000 | $ | 250,000 | $ | 270,000 |
| Total cash disbursements | $ | 288,000 | $ | 258,000 | $ | 248,000 | $ | 268,000 |
The company’s beginning cash balance for the upcoming fiscal year
will be $28,000. 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.)
Opening balance = $28,000
Quarter 1
Total cash receipts = $ 220,000
Total cash disbursement = - $288,000
Cash deficiency = - 40,000
Minimum balance requirement = 10,000
Loan to be taken = $50,000
Quarter 2
Opening balance = 10,000
Total cash receipts = 370,000
Total cash disbursement = - 258,000
Interest paid = 50,000*3% = - 1,500
Closing balance = 120,500
Quarter 3
Opening balance = 120,500
Total cash receipts = 250,000
Total cash disbursement = - 248,000
Closing balance = 122,500
Quarter 4
Opening balance = 122,500
Total cash receipts = 270,000
Total cash disbursement = - 268,000
Closing balance = $124,500
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