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		$	471,700
February		401,000			346,700
March		455,000			527,000

According to a credit agreement with its bank, Reen 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 $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 $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.

Answer 1

Kayak Co.
Cash Budget
For the Month of Jan, Feb, Mar
	Jan	Feb	Mar
Beginning Cash Balance	50000	50000	57133
Cash Receipts	526000	401000	455000
Total Cash Available	576000	451000	512133
Cash Payment	471700	346700	527000
Interest Payment	1000	467	0
Preliminary Cash Balance	103300	103833	-14867
Desired Cash Balance	50000	50000	50000
Borrowings (Repayment)	-53300	-46700	64867
Closing Cash Balance	50000	57133	50000
Loan Balance
Beginning Balance	100000	46700	0
Borrowings (Repayment)	-53300	-46700	64867
Closing Balance	46700	0	64867