Exercise 8-7 Cash Budget [LO8-8] Garden Depot is a retailer that is preparing it

Question

Exercise 8-7 Cash Budget [LO8-8] 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: 10 points 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter $290,000 410,000 340,000 360,000 Total cash receipts Total cash disbursements 351,000 321,000 311,000 331,000 eBook Hint Print The company's beginning cash balance for the upcoming fiscal year will be $47,000. 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 References not compounded Required: Prepare the company's cash budget for the upcoming fiscal year. (Repayments, and interest, should be indicated by a minus sign.)

Explanation / Answer

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Beginning balance of cash 47,000 10000 73560 102560 Cash collections 290000 410000 340000 360000 Total 337000 420000 413560 462560 Less: Disbursales -351000 -321000 -311000 -331000 Actual Cash balance -14000 99000 102560 131560 Borrowing to be made to maintainmin balance 24000 (14000+10000) Total repayment that could be made 89000 Repayment of borrowing -24000 Interest paid on loan @3% for two quarters -1440 Closing balance of cash 10000 73560 102560 131560

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