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. 10 points January February March Cash Receipts $525,000 400,000 450,000 Cash payments $475,000 350,000 525,000 According to a credit agreement with the company's bank, Kayak promises to have 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 is complete but not entirely correct. KAYAK COMPANY Cash Budget For January, February, and March January February Beginning cash balance 30,000 $ 30,000 $ Cash receipts 522,000 X 404,500 X Total cash available 552,000 434,500 Cash payments (468,800) ► (351,300) Interest expense (600) (74) ► Preliminary cash balance 82,600 % 83,126 % Additional loan (loan repayment) (52.600) (7,400) Ending cash balance $ 30,000 $ 75,726 Ⓡ$ Loan balance Loan balance - Beginning of month $ 60,000 $ 7,400 $ Additional loan (loan repayment) (52,600) (7.400) Loan balance - End of month $ 7,400 $ 0 $ March 75,726 X 451,000 X 526,726 (529,000) (2,274) (4,548) 34,548 % 30,000 0 34,548 34,548 %

Answer 1

March 69294 450000 519294 -525000 KAYAK COMPANY Cash Budget For January, February, and March January February Beginning cash balance 30000 30000 Cash receipts 525000 400000 Total cash available 555000 430000 Cash payment -475000 -350000 Interest expense -600 -106 Preliminary cash balance 79400 79894 Additional loan (loan repayment) -49400 -10600 Ending cash balance 30000 69294 Loan balance Loan balance - Beginning of month 10600 Additional loan (loan repayment) -49400 - 10600 Loan balance - End of month 10600 -5706 35706 30000 3 5706 35706