5 Kayak Co budgeted the following cash receipts excluding ca

5 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 $521,000 $466,700 February 402,000 347,700 457,000 532, 000 March 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 $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.) References KAYAK COMPANY Cash Budget 40,000 5 80,000

Solution

KAYAK COMPANY

Cash Budget for the Month of January, February and March

January

February

March

Beginning Cash Balance

40000

40000

67535

Cash Receipts

521000

402000

457000

Total Cash Available

561000

442000

524535

Cash Disbursements

-466700

-347700

-532000

   Interest Expense (1% per month on beginning balance)

-800

-265

0

Preliminary Cash Balance

93500

94035

-7465

Additional Loan (Loan repayment)

-53500

-26500

47465

Ending Balance

40000

67535

40000

Loan Balance-Beginning of Month

80000

26500

0

Additional Loan (Loan repayment)

-53500

-26500

47465

Loan Balance- End of Month

26500

0

47465

Interest is calculated on beginning balance of loan like for month of January = (80,000 * 1%) = $ 800.

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KAYAK COMPANY
Cash Budget for the Month of January, February and March
	January	February	March
Beginning Cash Balance	40000	40000	67535
Cash Receipts	521000	402000	457000
Total Cash Available	561000	442000	524535
Cash Disbursements	-466700	-347700	-532000
Interest Expense (1% per month on beginning balance)	-800	-265	0
Preliminary Cash Balance	93500	94035	-7465
Additional Loan (Loan repayment)	-53500	-26500	47465
Ending Balance	40000	67535	40000
Loan Balance-Beginning of Month	80000	26500	0
Additional Loan (Loan repayment)	-53500	-26500	47465
Loan Balance- End of Month	26500	0	47465