xercise 20-17 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	$	522,000		$	468,800
February		405,000			351,800
March		470,000			521,000

According to a credit agreement with the companys bank, Kayak promises to have a minimum cash balance of $30,000 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 $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.)

March 470,000 521,000 KAYAK COMPANY Cash Budget For January, February, and March January February Beginning cash balance $ 30,000 $ 30,000 Cash receipts 522,000 405,000 Total cash available 552,000 435,000 Cash payments 468,800 351,800 Interest expense 60 Preliminary cash balance 83,140 Additional loan (loan repayment) Ending cash balance Loan balance Loan balance - Beginning of month $ 60,000 Additional loan (loan repayment) Loan balance - End of month