Question

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 anuary February March Cash Receipts $516,000 408,000 466,000 Cash payments $462,800 354,800 536,008 According to a credit agreement with the company's bank, Kayak promises to have a minimum cash balance of $50,000 at each month-end. In return, the bank has agreed that the company can borrow up to $140,000 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 For January, February, and Mar ch January February March Beginning cash balance Cash receipts Total cash available Cash payments nterest expense Preliminary cash balance Additional loan (loan repayment) Ending cash balance 50,000 516,000 566,000 (462,800) (1,000) 102,000 Loan balance Loan balance - Beginning of month Additional loan (loan repayment) Loan balance End of month 100,000

Answer 1

Answer:

Preparation of monthly cash budgets for January, February and March :

KAYAK COMPANY
Cash Budget
For January, February and March
	January	February	March
Beginning cash balance	$ 50,000	$ 50,000	$ 54,922
Cash receipts	516,000	408,000	466,000
Total cash available	566,000	458,000	520,922
Cash payments	(462,800)	(354,800)	(536,000)
Interest expense (at 1%)	(1,000)	(478)	-0-
Preliminary cash balance	102,200	102,722	(15,078)
Additional loan (Loan repayment)	(52,200)	(47,800)	65,078
Ending Cash Balance	$ 50,000	$ 54,922	$ 50,000
Loan Balance
Loan balance - Beginning of month	$100,000	$ 47,800	-0-
Additional loan (Loan repayment)	( 52,200)	(47,800)	65,078
Loan balance - End of month	$ 47,800	-0-	$ 65,078

(Given beginning cash balance is $ 50,000 and any amt in excess of $ 50,000 will be repaid to loan balance. Also, beginning loan balance is $ 100,000 and interest charged is 1% on beginning loan balance of each month.)