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 $519,000 411,000 479,000 Cash payments $ 462,500 354,500 522,000 According to a credit agreement with the company's bank, Kayak promises to have 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 (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign.)

Answer 1

KAYAK COMPANY
Çash budget
For January, February and March
	January	February	March
Beginning cash balance	50000	50000	61555
Cash receipts	519000	411000	479000
Total cash available	569000	461000	540555
Cash payments	462500	354500	522000
Interest expense	1000	445	0
Preliminary cash balance	105500	106055	18555
Additional loan (loan repayment)	-55500	-44500	31445
Ending cash balance	50000	61555	50000
Loan balance
Loan balance- Beginning of month	100000	44500	0
Additional loan (loan repayment)	-55500	-44500	31445
Loan balance - End of month	44500	0	31445