Question

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 $ 525,000 $ 466,300
February 403,000 344,300
March 455,000 533,000

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 $140,000 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.

Answer 1

Answer:

Answer is given below.

Explanation:

CASH BUDGET   JAN                FEB                      MARCH

Beginning Balance  30,000          30,000               86,781

Add: Receipt    

Cash Collections-as computed above 525,000 403,000 480,000

Total Cash available  555,000 433,000 566,781

Payments:    

Cash disbursement-as computed above 466,300 344,300 523,000

Total Payments made 466,300 344,300 523,000

Net Balance  88,700 88,700 43,781

Add: Borrowings    

Less: Repayment of principal -58,100 -1,900 0

Less: Repayment of Interest -600 -19 0

Ending Balance of cash 30,000 86,781 43,781

Loan balance:    

Beginning balance  60000 1,900 0

Add: Borrowings    

Less: Repayments  -58100 -1900 0

Ending balance of loan 1900 0 0