Question

Exercise 07-17 Preparation of cash budgets (for three periods) LO P2

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	$	521,000		$	467,800
February		408,000			354,800
March		465,000			530,000

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.)

Answer 1

Answer-

KAYAK COMPANY
CASH BUDGET
PARTICULARS	January	February	March
	$	$	$
Beginning cash balance	50000	50000	54922
Total cash receipts	521000	408000	465000
Total cash available	571000	458000	519922
Less- Total cash disbursements	467800	354800	530000
Less- Interest expense (1% per month)	1000	478	0
Preliminary cash balance	102200	102722	-10078
Additional loan (loan repayment)	52200	47800	60078
Ending cash balance	50000	54922	50000
LOAN BALANCE
PARTICULARS	January	February	March
	$	$	$
Loan balance- beginning of month	100000	47800	0
Additional loan (loan repayment)	-52200	-47800	60078
Loan balance- end of month	47800	0	60078