Kayak Co. budgeted the following cash receipts (excluding cash receipts from loa
ID: 2577126 • 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 $40,000 at each month-end. In return, the bank has agreed that the company can borrow up to $140,000 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.
Receipts Cash
payments January $ 525,000 $ 466,300 February 403,000 344,300 March 455,000 533,000
Explanation / Answer
KAYAK COMPANY Cash Budget For January, February and March January February March Begning balance 40000 40000 76379 Cash Receipts 525000 403000 455000 Total cash available 565000 443000 531379 Cash Payments 466300 344300 533000 Interest expenses 800 221 0 (80000*1%) (22100*1%) Preliminary cash balance 97900 98479 -1621 (565000-466300-800) Additional loan (loan repayment) -57900 -22100 41621 Ending cash balance 40000 76379 40000 Loan Balance Loan Balance - Beginning of month 80000 22100 0 Additional loan (loan repayment) -57900 -22100 41621 Loan Balance - End of month 22100 0 41621
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