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.

	Cash Receipts			Cash payments
January	$	519,000		$	462,500
February		410,500			354,000
March		475,000			532,000

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 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 $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.

Prepare monthly cash budgets for January, February, and March. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign.)

Answer is not complete. March 475,000 KAYAK COMPANY Cash Budget For January, February, and March January February Beginning cash balance 40,000 $ 40,000 Cash receipts 519,000 410,500 Total cash available 559,000 450,500 Interest expense 800 243 Cash payments 462,500 354,000 Preliminary cash balance 95,700 96,257 Additional loan (loan repayment) (55,700) (56,257) Ending cash balance $ 40,000 Loan balance Loan balance - Beginning of month $ 80,000 $ 24,300 Additional loan (loan repayment) (55,700) Loan balance - End of month $ 24,300 532,000 $ 0

Answer 1

KAYAK COMPANY
Çash budget
For January, February and March
	January	February	March
Beginning cash balance	40000	40000	71957
Cash receipts	519000	410500	475000
Total cash available	559000	450500	546957
Cash payments	462500	354000	532000
Interest expense	800	243	0
Preliminary cash balance	95700	96257	14957
Additional loan (loan repayment)	(55700)	(24300)	25043
Ending cash balance	40000	71957	40000
Loan balance
Loan balance- Beginning of month	80000	24300	0
Additional loan (loan repayment)	(55700)	(24300)	25043
Loan balance - End of month	24300	0	25043