Question

Exercise 20-17 Preparation of cash budgets (for three periods) LO P2 Kayak Co. budgeted the following...

Exercise 20-17 Preparation of cash budgets (for three periods) LO P2

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 $ 519,000 $ 461,400
February 411,000 353,400
March 457,000 533,000


According to a credit agreement with its bank, Kayak requires 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.)

Homework Answers

Answer #1
  • Requirement asked

January

February

March

Beginning Cash balance

$40,000

$40,000

$74,168

Cash receipts

$519,000

$411,000

$457,000

Total Cash available

$559,000

$451,000

$531,168

Cash Payments

$461,400

$353,400

$533,000

Interest Expenses

$800

$232

$0

Preliminary Cash Balance

$96,800

$97,368

($1,832)

Additional Loan (loan repayments)

($56,800)

($23,200)

($4,585)

Ending Cash Balance

$40,000

$74,168

($6,417)

LOAN

Loan Balance - beginning

$80,000

$23,200

$0

Additional loan (loan repayment)

($56,800)

($23,200)

$46,417

Loan Balance - End

$23,200

$0

$40,000

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