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

Exercise 7-17 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 Cash Receipts $519,000 payments $466,900 January February March 401,500 459,000 349,400 532,000 According to a credit agreement with the company's bank, Kayak promises to have a minimum cash balance of $50,000 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 $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 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 is not complete. KAYAK COMPANY Cash Budget For January, February, and March March January February Beginning cash balance 50,000 50,000 Cash receipts 519,000 401.500 459,000 Total cash available 569,000 451,500 Interest expense Cash payments 466,900 349,400 532,000 Preliminary cash balance Additional loan (loan repayment) Ending cash balance Loan balance Loan balance - Beginning of month 100,000 0 Additional loan (loan repayment) Loan balance End of month