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
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