Exercise 07-17 Preparation of cash budgets (for three periods) LO P2

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	$	523,000		$	468,700
February		403,000			348,700
March		477,000			534,000

According to a credit agreement with its bank, Kayak requires a minimum cash balance of $50,000 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 $50,000 on the last day of each month. The company has a cash balance of $50,000 and a loan balance of $100,000 on January 1.

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.) KAYAK COMPANY Cash Budget For January, February, and March January February 30,000 March Beginning cash balanc Total cash available Preliminary cash balance Ending cash balance Loan balance s 0 000 Loan balance Beginning of month Additional loan (loan repayment) Loan balance - End of month