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.)
|
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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