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 disbursements (excluding cash disbursements for loan principal and interest payments) for the first three months of next year. January February March Cash Receipts $517,000 407,500 475,000 Cash Disbursements $478,000 360,000 525,000 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 January1 Prepare monthly cash budgets for each of the first three months of next year. (Be certain to enter"O" wherever required. Negative balance and Loan repayment amount should be indicated with minus sign

Explanation / Answer

Particulars January February March Beginning Cash Balance 40000 40000 45282 Cah receipts 517000 407500 475000 Total Cash Available 557000 447500 520282 Cash Disbursements -478000 -360000 -525000 Interest Expense 80000*12%*1/12, 41800*12%*1/12 -800 -418 0 Preliminary Cash Balance 78200 87082 -4718 Additional Loan (Repayment) (78200-40000) -38200 -41800 35282 Ending Cash Balance 40000 45282 40000 Particulars January February March Loan Balance- Beginning of month 80000 41800 0 Additional Loan (Repayment) -38200 -41800 35282 Loan Balance- End of Month 41800 0 35282

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