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

ID: 2427989 • Letter: G

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: The company's beginning cash balance for the upcoming fiscal year will be $36,000. 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. Complete the company's cash budget for the upcoming fiscal year.

Explanation / Answer

Garden depot Cash Budget 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year Beginning Cash Balance              36,000              10,000           103,100           117,100                  36,000 Total Cash Receipts           260,000           410,000           290,000           310,000            1,270,000 Total Cash Available           296,000           420,000           393,100           427,100            1,306,000 Less: Total Cash disbursements         (316,000)         (286,000)         (276,000)         (296,000)         (1,174,000) Excess of cash available over disbursements           (20,000)           134,000           117,100           131,100               132,000 Financing: Borrowings              30,000                       -                         -                         -                    30,000 Repayments                       -             (30,000)                       -                         -                 (30,000) Interest                       -                   (900)                       -                         -                       (900) Total Financing              30,000           (30,900)                       -                         -                       (900) Ending Cash Balance              10,000           103,100           117,100           131,100               131,100