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	$	518,000		$	462,600
February		409,500			354,100
March		475,000			529,000

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

Answer 1

Prepare monthly cash budgets for January, February, and March

	January	February	March
Beginning balance	30000	30000	85348
Cash receipts	518000	409500	475000
Total cash available	548000	439500	560348
Less: Cash payment	-462600	-354100	-529000
Less: Interest	-600	-52	0
Total cash disbursement	-463200	-354152	-529000
Preliminary cash balance	84800	85348	31348
Loan taken (repaid)	-54800	0	0
Ending balance	30000	85348	31348