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: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total cash receipts $ 240,000 $ 390,000 $ 270,000 $ 290,000 Total cash disbursements $ 302,000 $ 272,000 $ 262,000 $ 282,000 The company’s beginning cash balance for the upcoming fiscal year will be $32,000. 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.

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: Total cash receipts Total cash disbursements 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 240,000 390,000 270,000290,000 $302,000 272,000 262,000 282,000 The company's beginning cash balance for the upcoming fiscal year will be $32,000. 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.)

Explanation / Answer

Q1 Q2 Q3 Q4 Begning balance 32000 10000 85600 93600 Cash Receipts: Cash Sales 240000 390000 270000 290000 Total cash available 272000 400000 355600 383600 Cash Payments: Cash disburment 302000 272000 262000 282000 Total cash Payments 302000 272000 262000 282000 Cash available minus cash payments -30000 128000 93600 101600 Financing activity: Borrowings 40000 Repayment 40000 Interest 2400 (40000*3%*2) Total Financing 40000 42400 Closing balance 10000 85600 93600 101600

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