Question

Exercise 07-17 Preparation of cash budgets (for three periods) LO P2 Kayak Co budgeted the following cash receipts (excluding cash receipts from loans received) and cash payments (excluding cash payments for loan principal and interest payments) for the first three months of next year January February March Cash Receipts $520,000 409,500 464,000 Cash payments $463,500 353,000 535,000 According to a credit agreement with its bank, Kayak requires a minimum cash balance of $50,000 at each month-end. In return, the bank has agreed that the company can borrow up to $150,000 at a monthly interest rate of 1%, paid on the last day of each month. The interest is computed based on the beginning balance of the loan for the month. The company repays loan principal with any cash in excess of $50,000 on the last day of each month. The company has a cash balance of $50,000 and a loan balance of $100.000 at January 1 Prepare monthly cash budgets for January, February, and March (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign.) KAYAK COMPANY Cash Budget

Answer 1

Answer

	January	February	March
Beginning Cash balance	$50,000	$50,000	$61,555
Cash receipts	$520,000	$409,500	$464,000
Total Cash available	$570,000	$459,500	$525,555
Cash Payments	$463,500	$353,000	$535,000
Interest Expenses	$1,000	$445	$0
Preliminary Cash Balance	$105,500	$106,055	($9,445)
Additional Loan (loan repayments)	($55,500)	($44,500)	$59,445
Ending Cash Balance	$50,000	$61,555	$50,000
LOAN
Loan Balance - beginning	$100,000	$44,500	$0
Additional loan (loan repayment)	($55,500)	($44,500)	$59,445
Loan Balance - End	$44,500	$0	$59,445