Question

Please answer all parts of chart

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		$	468,900
February		400,500			348,400
March		453,000			533,000

According to a credit agreement with the company’s bank, Kayak promises to have a minimum cash balance of $40,000 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 $40,000 on the last day of each month. The company has a cash balance of $40,000 and a loan balance of $80,000 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	$40,000
Total cash available
Preliminary cash balance
Ending cash balance
Loan balance
Loan balance - Beginning of month	$80,000
Additional loan (loan repayment)
Loan balance - End of month

Answer 1

	KAYAK COMPANY
	Cash Budget
	For January, February, and March
	January	February	March
Beginning cash balance	40000	40000	63113
Cash receipts	521000	400500	453000
Total cash available	561000	440500	516113
Cash disbursements	468900	348400	533000
Interest expense	800	287	0
Preliminary cash balance	91300	91813	-16887
Additional loan (loan repayment)	-51300	-28700	56887
Ending cash balance	40000	63113	40000
	Loan balance
Loan balance ­ Beginning of month	80000	28700	0
Additional loan (loan repayment)	-51300	-28700	56887
Loan balance ­ End of month	28700	0	56887
Note:
Interest expense January = 80000*1% = 800
Interest expense February = 28700*1% = 287