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

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.

Required:

Prepare the company’s cash budget for the upcoming fiscal year. (Repayments, and interest, should be indicated by a minus sign.)

Include: 1st quarter 2nd quarter 3rd quarter 4th quarter year

Beginning cash balance

Total cash recipts

total cash available

total cash disbursements

excess of cash avaiable over disbursements

Financing:

borrowings

repayments

interest

total financing

ending cash balance

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total cash receipts $ 260,000 $ 410,000 $ 290,000 $ 310,000 Total cash disbursements $ 316,000 $ 286,000 $ 276,000 $ 296,000

Explanation / Answer

Solution:

Garden Depot - Cash Budget Particulars 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Beginning Cash Balance $36,000.00 $10,000.00 $103,100.00 $117,100.00 $36,000.00 Total cash receipts $260,000.00 $410,000.00 $290,000.00 $310,000.00 $1,270,000.00 Total cash available $296,000.00 $420,000.00 $393,100.00 $427,100.00 $1,306,000.00 Less: Total cash disbursement $316,000.00 $286,000.00 $276,000.00 $296,000.00 $1,174,000.00 Excess of cash available over disbursement -$20,000.00 $134,000.00 $117,100.00 $131,100.00 $132,000.00 Financing: Borrowings $30,000.00 $0.00 $0.00 $0.00 $30,000.00 Repayments $0.00 $30,000.00 $0.00 $0.00 $30,000.00 Interest $0.00 $900.00 $0.00 $0.00 $900.00 Total financing $30,000.00 -$30,900.00 $0.00 $0.00 -$900.00 Ending cash balance $10,000.00 $103,100.00 $117,100.00 $131,100.00 $131,100.00

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