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		$	468,500
February		410,000			353,500
March		482,000			524,000

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 $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 COMPANY Cash Budget For January, February, and March January February March Beginning cash balance $40,000 $40,000 Cash receipts 525,000 410,000 482,000 Total cash available 565,000 450,000 Cash payments 468,500 353,500 524,000 Interest expense 0 Preliminary cash balance Additional loan (loan repayment) Ending cash balance Loan balance Loan balance - Beginning of month $80,000 $0 Additional loan (loan repayment) Loan balance - End of month

Answer 1

	January	February	March
Beginning cash Balance	$40,000	$40,000	$71,957
Cash receipts	$525,000	$410,000	$482,000
Total Cash Available	$565,000($40,000+$525,000)	$450,000	$553,957 [$71,957+482,000]
Cash Payment	($468,500)	($353,500)	($524,000)
Interest expense	($800)	($243)	$0
preliminary cash balance	$95,700	$96,257[$450,000-$353,500-$243]	$29,957
Additional loan (repayment)	($55,700)	($24,300) [The balance of loan pending]	$10,043($29,957-$40,000 minimum balance)
Ending Cash Balance	$40,000	$71,957[$96,257-$24,300]	$40,000
Loan balance
Loan balance-beginning of month	$80,000	$24,300	$0
Additional loan(repayment)	($55,700)	($24,300)	$10,043
Loan balance end of month	$24,300	$0	$10,043

	January	February	March
Loan bal. at the beginning of month	$80,000	$24,300	$0
interest 1%	$800($80,000*1%)	$243($24,300*1%)	$0