You have been hired by Ashton Corporation, a retailer, to assist in preparing the annual cash budget. The following information is available regarding the quarterly budgeted cash flows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total cash receipts $ 270,000 $ 420,000 $ 300,000 $ 320,000 Total cash disbursements $ 323,000 $ 293,000 $ 283,000 $ 303,000 The company’s beginning cash balance for the upcoming fiscal year will be $38,000. 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.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
You have been hired by Ashton Corporation, a retailer, to assist in preparing the annual
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||
| Total cash receipts | $ | 270,000 | $ | 420,000 | $ | 300,000 | $ | 320,000 |
| Total cash disbursements | $ | 323,000 | $ | 293,000 | $ | 283,000 | $ | 303,000 |
The company’s beginning cash balance for the upcoming fiscal year will be $38,000. 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. (Cash deficiency, repayments and interest should be indicated by a minus sign.)
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