Question

5

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 $515,000 412,000 478,000 Cash payments $461,820 358,800 524,000 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%, pald 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

KAYAK COMPANY
Cash Budget
For January, February, and March
	January	February	March
Beginning balance	30000	30000	75726
Cash Receipts	515000	412000	478000
Total cash available	545000	442000	553726
Cash Payments	461800	358800	524000
Interest expenses	600	74	0
	(60000*1%)	(7400*1%)
Preliminary cash balance	82600	83126	29726
	(545000-461800-600)
Additional loan (loan repayment)	-52600	-7400	274
Ending cash balance	30000	75726	30000
Loan Balance
Loan Balance - Beginning of the month	60000	7400	0
Additional loan (loan repayment)	-52600	-7400	274
Loan Balance - End of month	7400	0	274