Question

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 Disbursements
January $525,000 $475,000
February 400,000 350,000
March 450,000 525,000

Kayak requires a minimum cash balance of $30,000 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 $30,000 is used to repay loans at month-end. The company has a cash balance of $30,000 and a loan balance of $60,000 at January 1.

Required:
Prepare monthly cash budgets for each of the first three months of next year.

Answer 1

The preparation of the cash budget for the first three months of next year for Kayak Company is as follows:

Kayak Company's Cash Budget

                                                             January        February        March

Beginning balance                              $30,000       $30,000      $69,294

Cash receipts                                      525,000       400,000      450,000

Total cash available                         $555,000     $430,000     $519,294

Cash disbursements                         (475,000)     (350,000)     (525,000)

Cash balance                                     $80,000       $80,000        ($5,706)

Minimum required balance             (30,0000)     (30,0000)       (30,000)

Loan interest                                           (600)              (106)

Cash available for loan repayment $49,400       $49,894

Beginning Loan balance                  (60,000)      ($10,600)

Loan taken                                                                                    $35,706

Ending Loan balance                      ($10,600)         $0              ($35,706)

Excess cash available                       $0               $39,294

Total Ending Cash                          $30,000       $69,294        $30,000

What is a cash budget?

A cash budget is a management financial statement that shows the cash inflows (receipts) and cash outflows (payments) within a financial period.  It is usually prepared in advance to help managers make important cash planning decisions.

Data and Calculations:

             Cash Receipts    Cash Disbursements

January     $525,000                $475,000

February     400,000                  350,000

March          450,000                 525,000

Thus, the preparation of Kayak Company's cash budget will guide the managers with cash decisions.

Learn more about preparing cash budgets at https://brainly.com/question/16346203