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. January February March Cash Receipts $518,000 404,000 464,000 Cash payments $465,900 351,900 531,000 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 $160,000 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 March January February $ 50,000 March Beginning cash balance Total cash available Preliminary cash balance Ending cash balance Loan balance $ 100,000 Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month

Answer 1

	January	Februrary	March
Beginning Cash Balance	$        50,000	$         50,000	$       52,711
Cash Receipts	$     5,18,000	$     4,04,000	$    4,64,000
Total Cash Available	$     5,68,000	$     4,54,000	$    5,16,711
Cash Payments	$     4,65,900	$     3,51,900	$    5,31,000
Interest Payment	$          1,000	$              489	$                -
Preliminary cash balance	$     1,01,100	$     1,01,611	$      -14,289
Additional Loan (Repayment)	$      -51,100	$       -48,900	$       64,289
Ending Cash Balance	$        50,000	$         52,711	$       50,000
Loan
Beginning Balance	$     1,00,000	$         48,900	$                -
Additional Loan (Repayment)	$      -51,100	$       -48,900	$       64,289
Ending Balance	$        48,900	$                 -	$       64,289

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