Forest Outittersis retaliler that is preparingits budget for the upcoming fiscal
ID: 2570509 • Letter: F
Question
Forest Outittersis retaliler that is preparingits budget for the upcoming fiscal year. Management has prepared the following summary of its budgeted cash flows: -cashBudget (15 Points! Fourth First Second Total cash receipts Total cash disbursements 340,000$ 670,000 410,000 S 470,000 $530,000 S 450,000 $ 430,000 480,000 The company The company's beginning cash balance for the upcoming fiscal year will be $45,000 ocal bank requires a minimum cash balance of $40,000 and may borrow any amount needed from al at a quarterly interest rate of 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. Interest payments are due on any principal at the time it is repaid. Required: Prepare the company's cash budget for the upcoming fiscal year Ist Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Cash balance, beginning Total cash receipts Total cash available Less total cash disbursements Financing: Borrowings (at beginning)* Repayments (at ending) Interest Total financing Cash balance, endingExplanation / Answer
1. Step 1 of 1
Create a chart for the cash budget. Remember that if the available cash decreases below $40,000 the company will need to borrow an amount that increases the cash on hand to $40,000. The company must also repay its loans when cash is available. Also, keep in mind that ending balances for one period are the beginning balances in the next period. The cash budget is as follows:
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Year
Cash balance, beginning
$ 45,000
$ 40,000
$ 60,200
$ 40,200
$ 45,000
Total cash receipts
340,000
670,000
410,000
470,000
1,890,000
Total cash available
(Beg. Bal + cash rec.)
385,000
710,000
470,200
510,200
1935000
Less total cash disbursements
530,000
450,000
430,000
480,000
1,890,000
Excess (deficiency) of cash available over disbursements
(145,000)
260,000
40,200
30,200
45,000
Financing:
Borrowings (at beginning)
185,000
(145,000+40,000)
185,000
Repayments (at ending)
(185,000)
(185,000)
Interest
(14,800)
($185,000 × 4% × 2 quarters)
(14,800)
Total financing
185,000
(180,200)
(14,800)
Cash balance, ending
$ 40,000
$ 60,200
$ 40,200
$ 30,200
$ 30,200
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Year
Cash balance, beginning
$ 45,000
$ 40,000
$ 60,200
$ 40,200
$ 45,000
Total cash receipts
340,000
670,000
410,000
470,000
1,890,000
Total cash available
(Beg. Bal + cash rec.)
385,000
710,000
470,200
510,200
1935000
Less total cash disbursements
530,000
450,000
430,000
480,000
1,890,000
Excess (deficiency) of cash available over disbursements
(145,000)
260,000
40,200
30,200
45,000
Financing:
Borrowings (at beginning)
185,000
(145,000+40,000)
185,000
Repayments (at ending)
(185,000)
(185,000)
Interest
(14,800)
($185,000 × 4% × 2 quarters)
(14,800)
Total financing
185,000
(180,200)
(14,800)
Cash balance, ending
$ 40,000
$ 60,200
$ 40,200
$ 30,200
$ 30,200