Q2. Home Depot is a retailer that is preparing its budget for the upcoming fisca

Question

Q2. Home 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 $290,000 $410,000 $340,000 $360,000
Total cash disbursements $351,000 $321,000 $311,000 $331,000
Additional Information:
a. The company’s beginning cash balance for the upcoming fiscal year will be $47,000.
b. 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%.
c. 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.
d. Interest payments are due on any principal at the time it is repaid.
Required: Complete the company's cash budget for the upcoming fiscal year. (Cash deficiency, repayments, and
interest, should be indicated by a minus sign.)

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Explanation / Answer

Q # 1 Q # 2 Q # 3 Q # 4 Remarks Total cash receipts          290,000          410,000          340,000          360,000 Total cash disbursement (351,000) (321,000) (311,000) (331,000) Cash Balance          (61,000)            89,000            29,000            29,000 Cash balance in this row is difference of cash receipts and cash disbursements Opening cash balance            47,000            10,000            74,280          103,280 Opening cash balance is exactly the same which was closing balance of previous quarter Closing Cash Balance          (14,000)            99,000          103,280          132,280 Closing cash balance is the total sum of cash balance and opening cash balance Borrowed money            24,000                     -                       -                       -   In Q !, the cash is deficient so in order to bring the cash balance to the minimum level of $ 10000, $ 24000 wre borrowed. This was repaid in Q 2 with interest at the quartely rate of 3% Repaid money                     -            (24,000)                     -                       -   Interest paid no borrowing                     -                    720                     -                       -   Net cash balance            10,000            74,280          103,280          132,280 Net cash balance is the final cash balance aftyer considering borrwed sums, sums repaid and interest and this figure is the opening cash balance for the next quarter

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