EXERCISE 9-7 Cash Budget LO 98] Garden Depot is a retailer that is preparing its
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Question
EXERCISE 9-7 Cash Budget LO 98] 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 recelpts $180,000 $330,000 $210,000 $230,000 The company's beginning cash balance for the upcoming fiscal year will be $20,000. 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 begining of anyuante andns, orany par of is oans. 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 yearExplanation / Answer
Answer:
Garden Depot Cash Budget
1st Q
2nd Q
3rd Q
4th Q
Bal. Beg.
20000
10000
35800
25800
Cash Receipts
180000
330000
210000
230000
Total cash available
200000
340000
245800
255800
Less cash disb’ts
260000
230000
220000
240000
Excess (deficiency)
-60000
110000
25800
15800
Financing:
Borrowings (beg)
70000
Repayment (at end)
-70000
Interest*
-4200
Total financing
70000
-74200
Cash bal. End
10000
35800
25800
15800
Working notes
1
Interest calculation
=70,000*12%*6/12
=$4200
Garden Depot Cash Budget
1st Q
2nd Q
3rd Q
4th Q
Bal. Beg.
20000
10000
35800
25800
Cash Receipts
180000
330000
210000
230000
Total cash available
200000
340000
245800
255800
Less cash disb’ts
260000
230000
220000
240000
Excess (deficiency)
-60000
110000
25800
15800
Financing:
Borrowings (beg)
70000
Repayment (at end)
-70000
Interest*
-4200
Total financing
70000
-74200
Cash bal. End
10000
35800
25800
15800
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