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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. January February Cash Receipts $520,000 412,000 453,000 Cash payments $462,400 354,400 531,000 March 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 $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 $40,000 on the last day of each month. 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. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign.) Answer is not complete. KAYAK COMPANY March 453,000 Cash Budget For January, February, and March January February Beginning cash balance 40,000 $ 40,000 Cash receipts 520,000 412,000 Total cash available 560,000 452.000 Cash payments 462,400 354,400 Interest expense 800 Preliminary cash balance 96,800 Additional loan (loan repayment) Ending cash balance $ 40,000 Loan balance 531,000 0 $ 40,000 80,000 $ 0 Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month $ 0

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