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 $ 526,000 $ 470,600 February 408,000 352,600 March 465,000 532,000 According to a credit agreement with its bank, Kayak requires a minimum cash balance of $30,000 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 $30,000 on the last day of each month. The company has a cash balance of $30,000 and a loan balance of $60,000 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 1

Requirement

--Cash Budget, as asked

	January	February	March
Beginning Cash balance	$30,000	$30,000	$80,148
Cash receipts	$526,000	$408,000	$465,000
Total Cash available	$556,000	$438,000	$545,148
Cash Payments	$470,600	$352,600	$532,000
Interest Expenses	$600 [60000 x 1%]	$52 [5200 x 1%]	$0
Preliminary Cash Balance	$84,800	$85,348	$13,148
Additional Loan (loan repayments)	($54,800)	($5,200)	$16,852
Ending Cash Balance	$30,000	$80,148	$30,000
LOAN
Loan Balance - beginning	$60,000	$5,200	$0
Additional loan (loan repayment)	($54,800)	($5,200)	$16,852
Loan Balance - End	$5,200	$0	$16,852