Question

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

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 \$ 517,000 \$ 461,600 February 405,500 350,100 March 476,000 532,000 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. (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 30000 30000 80148 Cash receipts 517000 405500 476000 Total cash available 547000 435500 556148 Cash disbursements 461600 350100 532000 Interest expense 600 52 0 Preliminary cash balance 84800 85348 24148 Additional loan (loan repayment) -54800 -5200 5852 Ending cash balance 30000 80148 30000 Loan balance Loan balance ­ Beginning of month 60000 5200 0 Additional loan (loan repayment) -54800 -5200 5852 Loan balance ­ End of month 5200 0 5852 Note: Interest expense January = 60000*1% = 600 Interest expense February = 5200*1% = 52

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