Question

# Kayak Co. budgeted the following cash receipts (excluding cash receipts from loans received) and cash disbursements...

 Kayak Co. budgeted the following cash receipts (excluding cash receipts from loans received) and cash disbursements (excluding cash disbursements for loan principal and interest payments) for the first three months of next year.
 Cash Receipts Cash Disbursements January \$ 525,000 \$ 475,000 February 400,000 350,000 March 450,000 525,000
 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 an annual interest rate of 12%, 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 available cash 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 each of the first three months of next year. (Be certain to enter "0" wherever required. Negative balance and Loan repayment amount should be indicated with minus sign.)

 KAYAK COMPANY Cash Budget For January, February, and March January February March Beginning cash balance 30000 30000 69294 Cash receipts 525000 400000 450000 Total cash available 555000 430000 519294 Cash disbursements 475000 350000 525000 Interest expense 600 106 0 Preliminary cash balance 79400 79894 -5706 Additional loan (loan repayment) -49400 -10600 35706 Ending cash balance 30000 69294 30000 Loan balance Loan balance ­ Beginning of month 60000 10600 0 Additional loan (loan repayment) -49400 -10600 35706 Loan balance ­ End of month 10600 0 35706 Working: Interest expense: January (\$60,000 × 12%/12) = \$600 Interest expense: February (\$10,600 × 12%/12) = \$106