Can someone please help me explain the answer to this questi

Can someone please help me explain the answer to this question? I am having difficulty.

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 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter $.299,000 $440,000 $329,000 $340,000 Total cash receipts Total cash disbursements 337, 000 307,000 S297,000 $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.) Garden Depot Cash Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Beginning cash balance Total cash receipts Total cash available Total cash disbursements Excess of cash available over disbursements

Solution

Garden Depot

Cash Budget

Particulars

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Beginning Cash Balance

$           42,000.00

$           10,000.00

$        127,072.08

$        150,072.08

Total Cash Receipts

$        290,000.00

$        440,000.00

$        320,000.00

$        340,000.00

Total cash Avalable

$        332,000.00

$        450,000.00

$        447,072.08

$        490,072.08

Total Cash Disbursements

$      -337,000.00

$      -307,000.00

$      -297,000.00

$      -317,000.00

Excess of cash avalable over disbursements

$           -5,000.00

$        143,000.00

$        150,072.08

$        173,072.08

Repayment of Bank Loan at the end of Quarter

$                          -  

$        -15,464.00

$                          -  

$                          -  

Loan Taken from Bank to cover all Disbursements

$           15,463.92

$                          -  

$                          -  

$                          -  

Less:Interst on Bank Loan

$              -463.92

$              -463.92

$                          -  

$                          -  

Closing cash Balance

$           10,000.00

$        127,072.08

$        150,072.08

$        173,072.08

Notes

1) In the first quarter there is a cash deficit of 5000 Dollars and minimum cash balance is 10000Dollar. That means loan amount would be 15000 Dollar+Interest to be paid on Loan Amount. That is why a loan of 15463.92 Dollar is taken so that balance of 10000 cash is maintained, Deficit is removed and interest on loan is also paid.

2) The loan of 15463.92 could not be repaid in first quarter so it has been repaid at the end of 2nd Quarter and interest fot the quarter is also paid for second quarter.

3) There is Plenty of Cash in Third and Fourth Quarter and no Bank loan is needed.

Garden Depot
Cash Budget
Particulars	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
Beginning Cash Balance	$           42,000.00	$           10,000.00	$        127,072.08	$        150,072.08
Total Cash Receipts	$        290,000.00	$        440,000.00	$        320,000.00	$        340,000.00
Total cash Avalable	$        332,000.00	$        450,000.00	$        447,072.08	$        490,072.08
Total Cash Disbursements	$      -337,000.00	$      -307,000.00	$      -297,000.00	$      -317,000.00
Excess of cash avalable over disbursements	$           -5,000.00	$        143,000.00	$        150,072.08	$        173,072.08
Repayment of Bank Loan at the end of Quarter	$                          -	$        -15,464.00	$                          -	$                          -
Loan Taken from Bank to cover all Disbursements	$           15,463.92	$                          -	$                          -	$                          -
Less:Interst on Bank Loan	$              -463.92	$              -463.92	$                          -	$                          -
Closing cash Balance	$           10,000.00	$        127,072.08	$        150,072.08	$        173,072.08
Notes
1) In the first quarter there is a cash deficit of 5000 Dollars and minimum cash balance is 10000Dollar. That means loan amount would be 15000 Dollar+Interest to be paid on Loan Amount. That is why a loan of 15463.92 Dollar is taken so that balance of 10000 cash is maintained, Deficit is removed and interest on loan is also paid.
2) The loan of 15463.92 could not be repaid in first quarter so it has been repaid at the end of 2nd Quarter and interest fot the quarter is also paid for second quarter.
3) There is Plenty of Cash in Third and Fourth Quarter and no Bank loan is needed.