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 $27,000. 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.)

Explanation / Answer

Cash budget 1 2 3 4 year Beginning cash balance 27000 10000 70900 108900 216800 Total cash receipts 320000 440000 370000 390000 1520000 Total cash available 347000 450000 440900 498900 1736800 less:Total cash disbursements -372000 -342000 -332000 -352000 -1398000 excess of cash available over disbursement -25000 108000 108900 146900 338800 Financing Borrowings    [25000 loss + 10000minimum balance] 35000 35000 Repayments -35000 -35000 Interest -2100    [35000*.03*2 quarters ] -2100 Total financing 35000 -37100 -2100 Ending cash balance 10000 70900 108900 146900 336700

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