Garden Depot is a retailer that is preparing its budget for the upcoming fiscal
ID: 2561738 • 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: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter $ 290,000 $ 440,000 320,000 340,000 Total cash receipts Total cash disbursements337,000 $307,000 $297,000 $ 317,000 The company's beginning cash balance for the upcoming fiscal year will be $42,000. 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: Prepare the company's cash budget for the upcoming fiscal year. (Repayments, and interest, should be indicated by a minus sign.) Cash Budget 1st 2nd Quarter Quarter 4th Quarter Year Beginning cash balance Total cash receipts Total cash available Total cash disbursements Excess of cash available over disbursements Financing: Borrowings Interest Total financing Ending cash balanceExplanation / Answer
Garden Depot
Cash Budget:
Garden Depot
Cash Budget
Ist Quarter
2nd Quarter
3rd Quarter
4th Quarter
Year
Beginning cash balance
$42,000
$10,000
$127,100
$150,100
$329,200
Total cash receipts
$290,000
$440,000
$320,000
$340,000
$1,390,000
Total cash available
$332,000
$450,000
$447,100
$490,100
$1,719,200
total cash disbursements
($337,000)
($307,000)
($297,000)
($317,000)
($1,258,000)
Excess of cash available over disbursements
($5,000)
$143,000
$150,100
$173,100
$461,200
Financing:
Borrowings
15,000
$15,000
Repayments
-15,000
($15,000)
Interest
($900)
($900)
Total Financing
$15,000
($15,900)
($15,900)
Ending Cash Balance
$10,000
$127,100
$150,100
$173,100
$460,300
Borrowings to maintain the minimum cash balance of $10,000 are made in the start of the first quarter. Hence, quarterly interest of 3% is paid for two quarters at the end of second quarter along with loan repayment.
The interest on $15,000 borrowed in the start of first quarter = 15,000 x 3% x 2 = $900
Garden Depot
Cash Budget
Ist Quarter
2nd Quarter
3rd Quarter
4th Quarter
Year
Beginning cash balance
$42,000
$10,000
$127,100
$150,100
$329,200
Total cash receipts
$290,000
$440,000
$320,000
$340,000
$1,390,000
Total cash available
$332,000
$450,000
$447,100
$490,100
$1,719,200
total cash disbursements
($337,000)
($307,000)
($297,000)
($317,000)
($1,258,000)
Excess of cash available over disbursements
($5,000)
$143,000
$150,100
$173,100
$461,200
Financing:
Borrowings
15,000
$15,000
Repayments
-15,000
($15,000)
Interest
($900)
($900)
Total Financing
$15,000
($15,900)
($15,900)
Ending Cash Balance
$10,000
$127,100
$150,100
$173,100
$460,300
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