Garden Depot is a retailer that is preparing its budget for the upcoming fiscal
ID: 2559258 • Letter: G
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:
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 $320,000 $372,000 2nd Quarter $440,000 $342,000 3rd Quarter $370,000 $332,000 4th Quarter $390,000 $352,000 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 Required: Complete the company's cash budget for the upcoming fiscal year. (Cash deficiencies, disbursements, repayments, and interest should be indicated by a minus sign.) Garden Depot Cash Budget 1st Quarter 2nd Quarter 3rd Quarter 4th QuarterYear Beginning cash balance Total cash receipts Total cash available Less total cash disbursements Excess of cash available over disbursements Financing Borrowings Repayments Interest Total financing Ending cash balanceExplanation / Answer
Answer:
1
Garden Depot
Cash Budget
1st
2nd
3rd
4th
Year
Quarter
Quarter
Quarter
Quarter
Cash balance, Beginning
27000
10,000
70,900
108,900
27000
Total cash receipts.......
320,000
440,000
370,000
390,000
1,520,000
Total cash available......
347,000
450,000
440,900
498,900
1,547,000
Less total cash disbursements......
372000
342000
332000
352000
1,398,000
Excess (deficiency) of cash available over
disbursements
-25,000
108,000
108,900
146,900
149,000
Financing:
Borrowings (at beginnings of quarters)
35000
35000
Repayments (at ends of quarters)
-35000
-35000
Interest
-2100
-2100
Total financing
35000
-37100
0
0
-2100
Cash balance, ending
10,000
70,900
108,900
146,900
146,900
Working notes for the answer:
1
Since the deficiency of cash available over disbursements is $25,000, the company must borrow $35,000 to maintain the desired ending cash balance of $10,000.
2
Interest
=$35,000 × 3% × 2
= $2100
Garden Depot
Cash Budget
1st
2nd
3rd
4th
Year
Quarter
Quarter
Quarter
Quarter
Cash balance, Beginning
27000
10,000
70,900
108,900
27000
Total cash receipts.......
320,000
440,000
370,000
390,000
1,520,000
Total cash available......
347,000
450,000
440,900
498,900
1,547,000
Less total cash disbursements......
372000
342000
332000
352000
1,398,000
Excess (deficiency) of cash available over
disbursements
-25,000
108,000
108,900
146,900
149,000
Financing:
Borrowings (at beginnings of quarters)
35000
35000
Repayments (at ends of quarters)
-35000
-35000
Interest
-2100
-2100
Total financing
35000
-37100
0
0
-2100
Cash balance, ending
10,000
70,900
108,900
146,900
146,900
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