Question

Josh Reddick Nursery Corporation is a retailer of garden products. The company is in the process of preparing its budget for its next fiscal year. You have been given the following data about Reddick: 1. The company's beginning cash balance for the upcoming fiscal year will be $26,000 2. The company requires a minimum cash balance of $10,000 3. The company may borrow any amount needed from a local bank at a quarterly interest rate of 3%. 4. 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. 5. Interest payments are due on any principal at the time it is repaid and you can assume that interest is not compounded. In addition to the above data, Reddick has prepared the following summary of its budgeted cash flows: Total cash receipts Total cash disbursements 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter $ 210, eee $360, eee $ 240,000 $ 260, Bee $ 281,000 $ 251,800 $ 241,000 $ 261,000 Required: Prepare the company's cash budget for the upcoming fiscal year. (Repayments, and interest, should be indicated by a minus sign.) Josh Reddick Nursery Corporation Cash Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year

Answer 1

Solution

Josh Reddick Nursery Corporation
Cash budget
	Q1	Q2	Q3	Q4	Year
Beginning Cash balance	$     26,000.00	$       10,000.00	$      60,700.00	$     59,700.00	$           26,000.00
Total cash receipt	$ 210,000.00	$     360,000.00	$   240,000.00	$   260,000.00	$     1,070,000.00
Total cash available	$ 236,000.00	$     370,000.00	$   300,700.00	$   319,700.00	$     1,096,000.00
Less: Total cash disbursement	$ 281,000.00	$     251,000.00	$   241,000.00	$   261,000.00	$     1,034,000.00
Excess of cash available over disbursement	$ (45,000.00)	$     119,000.00	$      59,700.00	$     58,700.00	$           62,000.00
Financing:
Borrowings	$     55,000.00				$           55,000.00
Repayments	$                    -	$     (55,000.00)	$                     -	$                     -	$        (55,000.00)
Interest	$                    -	$       (3,300.00)	$                     -	$                     -	$           (3,300.00)
Total financing	$     55,000.00	$     (58,300.00)	$                     -	$                     -	$           (3,300.00)
Ending cash balance	$     10,000.00	$       60,700.00	$      59,700.00	$     58,700.00	$           58,700.00

Working note

Loan is taken at the beginning of the quarter and paid at the end of second . This means Loan of 55000 is taken at beginning of Q1 and repaid at End of Q2 so 2 Quarters interest will be paid on $55000.
						Beginning cash of Quarter 1 is the beginning cash of Year.