Prepare monthly cash budgets for January and February

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Problem - 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 ?rst three months of next year.

 

Cash Receipts

Cash Payments

January

$519,000

$460,300

February

406,500

347,800

March

452,000

526,000

According to a credit agreement with its bank, Kayak requires a minimum cash balance of $40,000 at each month-end. In return the bank has agreed that the company can borrow up to $160,000 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 $40,000 on the last day of each month. The company has a cash balance of $40,000 and a loan balance of $30,000 at January 1.

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

Reference no: EM132640036

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