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. Cash Receipts Cash payments January $ 525,000 $ 475,000 February 400,000 350,000 March 450,000 525,000 According to a credit agreement with its bank, Kayak requires 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.)

Answer 1

Step-by-step explanation:

Monthly Cash budget for January - March

Particulars January February March

Opening balance 30,000 30,000 69,294

Cash received 525,000 400,000 450,000

Total 555,000 430,000 519,294

Cash payment (475,000) (350,000) (525,000)

Interest (60000*1%) (600) 10600*1%(106) 0

79,400 79,894 (5,706)

Loan repayment (49,400) (10,600) 35,706

Minimum cash balance of 30,000 required.

(79,400-30,000)

(60,000-49,400)

Cash balance 30,000 69,294 30,000

Loan repayment.

January

Opening balance 60,000

Repayment (49,400)

balance 10,600

February

Opening balance 10,600

repayment(balance) (10,600)

March

35,706