Question

Please work the problem attached.

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 5521,000 407,000 477,000 Cash payments $468,000 354,900 524,000 According to a credit agreement with its bank, Kayak requires a minimum cash balance of $40,000 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 19 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 $40,000 on the last day of each month. The company has a cash balance of $40,000 and a loan balance of $80.000 at January 1

Answer 1

Correct Answer:

KAYAK COMPANY
Cash Budget
for January February and March
	January	February	March
Beginning Cash Balance	$            40,000	$                 40,000.00	$           63,113
Cash receipts	$          521,000	$               407,000.00	$        477,000
Total Cash Available	$          561,000	$               447,000.00	$        540,113
Cash payments	$       (468,900)	$            (354,900.00)	$      (524,000)
Interest Expense	$                (800)	$                     (287.00)	$                    -
Preliminary cash balance	$            91,300	$                 91,813.00	$           16,113
Additional loan (Loan Repayments)	$          (51,300)	$               (28,700.00)	$           23,887
Ending Cash Balance	$            40,000	$                 63,113.00	$           40,000
Loan Balance
Loan Balance -Beginning of Month	$            80,000	$                 28,700.00	$                    -
Additional Loan (Loan Repayment)	$          (51,300)	$               (28,700.00)	$           23,887
Loan Balance End of Month	$            28,700	$                                -	$           23,887

End of answer.

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