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

ID: 2570897 • Letter: K

Question

Kayak Co. budgeted the following cash receipts (excluding cash receipts from loans received) and cash disbursements (excluding cash disbursements for loan principal and interest payments) for the first three months of next year. Cash Receipts Cash Disbursements   January $ 524,000       $ 471,900           February 401,000       348,900           March 452,000       531,000         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 an annual interest rate of 12%, 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 available cash 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 each of the first three months of next year. (Negative balances and Loan repayment amounts (if any) should be indicated with minus signs.)

Explanation / Answer

January February March Opening cash          40,000         40,000        63,113 Budgeted Receipts       524,000       401,000     452,000 Budgeted Cash payments     (471,900)    (348,900) (531,000) Interest payment-80000*12%*1/12             (800) Interest payment-28700*12%*1/12             (287) Preliminary cash balance          91,300         91,813     (15,887) Borrow/paid back       (51,300)       (28,700)        55,887 Closing cash balance          40,000         63,113        40,000 Loan Balance          80,000         28,700                 -   New Loan/(Repaid)       (51,300)       (28,700)        55,887 Outstanding loan          28,700                  -          55,887