John's Sporting Goods is preparing its annual cash budget, showing quarterly data, for 2008. A $20,000 cash balance is desired at the end of each quarter. Borrowings and repayments are in $1,000 increments ar 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 teh end of a quarter with excess cash. The maximum amount of principal was repaid in the second quarter. The cash balance on December 31, 2007 is $21,000. Total receipts and disbursements, other than borrowings and principal or interest payments, are estimated at:
Disbursements: $226,000 (Quarter 1) $226,000 (Q2) $244,000 (Q3) $260,000 (Q4)
Receipts: $216,000 (Quarter 1) $230,000 (Q2) $245,000 (Q3) $253,000 (Q4)
*Prepare a schedule of estimated borrowings and repayments of principal and interest for 2008 and its quarters.
Please note the beginning cash balance is $21k