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	$	523,000		$	465,400
February		405,500			347,900
March		469,000			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.)

KAYAK COMPANYCash BudgetFor January, February, and MarchJanuaryFebruaryMarchBeginning cash balance$40,000$40,000Cash receipts523,000405,500469,000Total cash available563,000445,500Cash payments465,400347,900533,000Interest expense8000Preliminary cash balanceAdditional loan (loan repayment)Ending cash balanceLoan balanceLoan balance - Beginning of month$80,000$0Additional loan (loan repayment)Loan balance - End of month$0

Answer 1

Cash Budget
	Jan	Feb	Mar
Beginning Cash Balance	40,000	40,000	74,168
Cash Receipts	523,000	405,500	469,000
Total Cash Available	563,000	445,500	543,168
Cash Payments	465,400	347,900	533,000
Interest Expense	800	232	0
Preliminary Cash Balance	96,800	97,368	10,168
Additional Loan(repayment)	(56,800)	(23,200)	29,832
Ending Cash Balance	40,000	74,168	40,000
Loan Balance
Beginning of the month	80,000	23,200	0
Additional Loan(repayment)	(56,800)	(23,200)	29,832
End of the month	23,200	0	29,832