Garden Depot is a retailer that is preparing its budget for the upcoming fiscal
ID: 2555474 • 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 $35,000. 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. (Cash deficiency, repayments, and interest, should be indicated by a minus sign.)
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:
Answer is complete but not entirely correct. Garden Depot Cash Budget 1st 2nd 3rd 4th ear Quarter 10,000 420,000 Quarter $35,000 300,000 335,000 358,000 Excess of cash available over disbursements(23,000) Quarter 68,505 350,000 370,0001,440,000 uarter Beginning cash balance Total cash receipts Total cash available Less total cash disbursements 100,505 S 35,000 430,000 418,505 470,505 1,475,000 328,000318,000 338,000 1,342,000 133,000 102,000 100,505 132,505 Financing 33,000 33,000 (33,000) (495) (495) 132,505 Borrowings Repayments Interest (33,000) (495) 33,000 (33,495) $10,000 68,505 Total financing Ending cash balance 100.505 132.505Explanation / Answer
1st qtr 2nd qtr 3rd quarter 4 th qtr year Beginning cash balance 35,000 10,000 67,020 99,020 35,000 total cash receipts 300,000 420,000 350,000 370,000 1,440,000 total cash available 335,000 430000 417020 469020 1,475,000 total cash disbursements 358,000 328,000 318,000 338,000 1,342,000 Excess of cash available over disbursement -23,000 102,000 99,020 131,020 133,000 Financing: Borrowings 33,000 0 0 0 33,000 Repayments 0 -33,000 0 0 -33,000 Interest 0 -1,980 0 0 -1980 total financing 33,000 -34,980 0 0 -1,980 Ending cash balance 10,000 67,020 99,020 131,020 131,020 interest = 33000*3%*2 qtrs 1980
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