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 | $ | 516,000 | $ | 461,700 | ||
| February | 404,500 | 350,200 | ||||
| March | 471,000 | 523,000 | ||||
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 $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 $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.)
| KAYAK COMPANY | ||||||
| Cash Budget | ||||||
| For January, February, and March | ||||||
| January | February | March | ||||
| Beginning cash balance | $30,000 | |||||
| Total cash available | ||||||
| Preliminary cash balance | ||||||
| Ending cash balance | ||||||
| Loan balance | ||||||
| Loan balance - Beginning of month | $60,000 | $0 | ||||
| Additional loan (loan repayment) | ||||||
| Loan balance - End of month | ||||||
Monthly cash budgets for January, February, and March is as prepared below:
| KAYAK COMPANY | |||
| Cash Budget | |||
| For January, February, and March | |||
| January | February | March | |
| Beginning cash balance | $ 30,000 | 30,000 | 77,937 |
| Add: Cash Receipts | 516,000 | 404,500 | 471,000 |
| Total cash available | $ 546,000 | $ 434,500 | $ 548,937 |
| Cash disbursements | 461,700 | 350,200 | 523,000 |
| Interest expense | 600 | 63 | 0 |
| Preliminary cash balance | 83,700 | 84,237 | 25,937 |
| Additional loan (loan repayment) | -53,700 | -6,300 | 4,063 |
| Ending cash balance | 30,000 | 77,937 | 30,000 |
| Loan balance | |||
| Loan balance - Beginning of month | $ 60,000 | 6,300 | $ 0 |
| Additional loan (loan repayment) | -53,700 | -6,300 | 4,063 |
| Loan balance - End of month | 6,300 | 0 | 4,063 |
| Interest in january is 60,000*1% | |||
| Interest in February is 6,300*1% | |||
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