Exercise 7-17 (Algo) Preparation of cash budgets (for three periods) LO P2

Kayak Company 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	$ 521,000	$ 468,900
February	412,000	359,900
March	465,000	531,000

Kayak requires a minimum cash balance of $40,000 at each month-end. Loans taken to meet this requirement charge 1%, interest per month, paid at each month-end. The interest is computed based on the beginning balance of the loan for the month. Any preliminary cash balance above $40,000 is used to repay loans at month-end. The company has a cash balance of $40,000 and a loan balance of $80,000 at January 1.

Prepare monthly cash budgets for January, February, and March.

Note: Negative balances and Loan repayment amounts (if any) should be indicated with minus sign.

\begin{tabular}{|l|l|l|l|} \hline \multicolumn{5}{|c|}{ KAYAK COMPANY } \\ \hline \multicolumn{2}{|c|}{ Cash Budget } & \\ \hline Beginning cash balance & $ & & \\ \hline Add: Cash receipts & & & \\ \hline Total cash available & & & \\ \hline Less: Cash payments for & & & \\ \hline Interest on loan & & & \\ \hline & & & \\ \hline Total cash payments & & & \\ \hline Preliminary cash balance & & & \\ \hline Loan activity & & & \\ \hline & & & \\ \hline Ending cash balance & & & \\ \hline & & & \\ \hline Loan balance - Beginning of month & & & \\ \hline Additional loan (loan repayment) & & & \\ \hline Loan balance, end of month & & & \\ \hline \end{tabular}