Kayak Co. budgeted the following cash receipts (excluding cash receipts from loa

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 January February March Cash Receipts $519,000 407,500 455,000 Cash payments $461,400 349,900 522,000 According to a credit agreement with the company's bank, Kayak promises to have a minimum cash balance of $50,000 at each month-end. In return, the bank has agreed that the company can borrow up to $160,000 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 $50,000 on the last day of each month. The company has a cash balance of $50,000 and a loan balance of $100,000 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.)

Explanation / Answer

January February March Beginning cash balance 50000 50000 63766 Cash receipts 519000 407500 455000 Total cash available 569000 457500 518766 Cash disbursements 461400 349900 522000 Interest expense 1000 434 0 Preliminary cash balance 106600 107166 -3234 Additional loan (loan repayment) -56600 -43400 53234 Ending cash balance 50000 63766 50000 Loan balance ­ Beginning of month 100000 43400 0 Additional loan (loan repayment) -56600 -43400 53234 Loan balance ­ End of month 43400 0 53234

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