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 | $ | 270,000 | $ | 420,000 | $ | 300,000 | $ | 320,000 |
| Total cash disbursements | $ | 323,000 | $ | 293,000 | $ | 283,000 | $ | 303,000 |
The company’s beginning cash balance for the upcoming fiscal year
will be $38,000. 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 | |||||
| Cash Budget | |||||
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Year | |
| Beginning cash balance | 38000 | 10000 | 110500 | 127500 | 38000 |
| Total cash receipts | 270000 | 420000 | 300000 | 320000 | 1310000 |
| Total cash available | 308000 | 430000 | 410500 | 447500 | 1348000 |
| Less total cash disbursements | 323000 | 293000 | 283000 | 303000 | 1202000 |
| Excess of cash available over disbursements | -15000 | 137000 | 127500 | 144500 | 146000 |
| Financing: | |||||
| Borrowings | 25000 | 0 | 0 | 0 | 25000 |
| Repayments | 0 | -25000 | 0 | 0 | -25000 |
| Interest | 0 | -1500 | 0 | 0 | -1500 |
| Total financing | 25000 | -26500 | 0 | 0 | -1500 |
| Ending cash balance | 10000 | 110500 | 127500 | 144500 | 144500 |
| Interest = 25000*3%*2 = $1500 |
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