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 A10,0 $386,000 $356,000 $346,000 $366,000 $340,000 $460,000 $390,000 Total cash receipts Total cash disbursements The company's beginning cash balance for the upcoming fiscal year will be $24,000. 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.

Explanation / Answer

Garden depot

Cash budget

Borrowings = $32000 ($22000 deficit + $10000 minimum cash balance)

Interest = $480 ($32000 * 3% * 2/4).

1st quarter 2nd quarter 3rd quarter 4th quarter Year Beginning cash balance $24000 $10000 $81520 $125520 $241040 Total cash receipts $340000 $460000 $390000 $410000 $1600000 Total cash available $364000 $470000 $471520 $535520 $1841040 less: Total cash disbursements $386000 $356000 $346000 $366000 $1454000 Excess of cash available over disbursements ($22000) $114000 $125520 $169520 $387040 Financing: Borrowing $32000 $32000 Repayments ($32000) (32000) Interest ($480) ($480) Total financing $32000 ($32480) ($480) Ending cash balance $10000 $81520 $125520 $169520 $386560.

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