Kayak Co. budgeted the following cash receipts (excluding cash receipts from loa
ID: 2561903 • Letter: K
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.
According to a credit agreement with the company’s bank, Kayak promises to have a minimum cash balance of $30,000 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 $30,000 on the last day of each month. The company has a cash balance of $30,000 and a loan balance of $60,000 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.)
Receipts Cash
payments January $ 522,000 $ 468,800 February 404,500 351,300 March 451,000 529,000
Explanation / Answer
KAYAK COMPANY Cash Budget For January, February, and March January February March Beginning cash balance $30,000 $30,000 75,726 Cash receipts 522,000 404,500 451,000 Total cash available 552,000 434,500 526,726 Cash payments -468,800 -351,300 -529000 Interest expense -600 -74 -2,274 Preliminary cash balance 82,600 83,126 -4,548 Additional loan (loan repayment) -52,600 -7400 34,548 Ending cash balance $30,000 75,726 $30,000 Loan balance Loan balance - Beginning of month $60,000 $7,400 $0 Additional loan (loan repayment) -52,600 -7400 34,548 Loan balance - at the end of month 7400 0 34548
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