Instructions prepare a schedule of estimated borrowings and

Reference no: EM13596593

John's Sporting Goods is preparing its annual cash budget, showing quarterly data, for 2011. A $20,000 cash balance is desired at the end of each quarter. Borrowings and repayments are in $1,000 increments at 12% annual interest. The company borrows at the beginning of a quarter based on the estimated deficiency. Interest is paid only when principal is repaid at the end of a quarter with excess cash. The maximum amount of principal was repaid in the second quarter. The cash balance on December 31, 2010 is $21,000. Total receipts and disbursements, other than borrowings and principal or interest payments, are estimated at:

Quarter 1 Quarter 2 Quarter 3 Quarter 4
Disbursements: $226,000 $226,000 $244,000 $260,000
Receipts: 216,000 230,000 245,000 253,000

Instructions: Prepare a schedule of estimated borrowings and repayments of principal and interest for 2008 and its quarters. This is what I came up with (I'm not sure if it is correct):

John's Sporting Goods
Schedule of Expected Collections from Customers
For the Year Ending December 31, 2011
1 2 3 4
Beginning Cash 21,000 20,000 20,000 20,000
Add: receipts 216,000 230,000 245,000 253,000

Total available
cash 237,000 250,000 265,000 273,000
Less: Distributions 226,000 226,000 244,000 260,000
Excess of available
cash over 11,000 24,000 21,000 13,000
Financing
Borrowing 9,000 0 0 7,000
Repayments 0 4,000 1,000 0
Ending Cash
Balance 20,000 20,000 20,000 20,000

Reference no: EM13596593

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