Problem 2 Scrubs and Beyond Incorporated is a retailer of brand name scrubs, sho
ID: 2552749 • Letter: P
Question
Problem 2
Scrubs and Beyond Incorporated is a retailer of brand name scrubs, shoes and nursing accessories for fashion forward medical professionals. The company 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
$340,000
$670,000
$410,000
$470,000
Total cash disbursements
$530,000
$450,000
$430,000
$$480,000
The company’s beginning cash balance for the upcoming fiscal year will be $50,000. The company requires a minimum cash balance of $30,000 and may borrow any amount needed from a local bank at a quarterly interest rate of 3%, The Company may borrow any amount at the beginning of any quarter and may repay its loans, or any part of its loans, at the end of any quarter. Interest payments are due on any principal at the time it is repaid.
Required:
Prepare the company’s cash budget for the upcoming fiscal year (complete the table below).
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Year
Cash - beginning balance
Total cash receipts
Total cash available
Less: cash disbursements
Excess (deficiency) of cash
Borrowings
Repayments: Principal
Interest
Cash - ending balance
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Total cash receipts
$340,000
$670,000
$410,000
$470,000
Total cash disbursements
$530,000
$450,000
$430,000
$$480,000
Explanation / Answer
1Quarter
2ndQuarter
3rdQuarter
4thQuarter
Total
Cash - beginning balance
50000
30000
69800
49800
50000
Total cash receipts
340000
670000
410000
470000
1890000
Total cash available
390000
700000
479800
519800
1940000
Less: cash disbursements
530000
450000
430000
480000
1890000
Excess (deficiency) of cash
(140000)
250000
49800
39800
50000
Borrowings
Repayments: Principal
170000
(170000)
0
0
0
Interest
0
(10200)
0
0
(10200)
Cash - ending balance
30000
69800
49800
39800
39800
1Quarter
2ndQuarter
3rdQuarter
4thQuarter
Total
Cash - beginning balance
50000
30000
69800
49800
50000
Total cash receipts
340000
670000
410000
470000
1890000
Total cash available
390000
700000
479800
519800
1940000
Less: cash disbursements
530000
450000
430000
480000
1890000
Excess (deficiency) of cash
(140000)
250000
49800
39800
50000
Borrowings
Repayments: Principal
170000
(170000)
0
0
0
Interest
0
(10200)
0
0
(10200)
Cash - ending balance
30000
69800
49800
39800
39800
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