Kayak
Co. budgeted the following cash receipts (excluding cash receipts from
loans received) and cash disbursements (excluding cash disbursements for
loan principal and interest payments) for the first three months of
next year.
Cash Receipts | Cash Disbursements | |||
January | $ | 518,000 | $ | 485,000 |
February | 412,500 | 358,000 | ||
March | 462,000 | 532,000 | ||
|
According
to a credit agreement with the company’s 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 $150,000 at an annual
interest rate of 12%, 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 principal on the loan with available cash 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 each of the first three months of next year. (Amounts to be deducted should be indicated by a minus sign.)
Explanation:
Interest expense: January ($60,000 × 1%) = $600 |
Interest expense: February ($27,600 × 1%) = $276 |
HOw do you find the additional loan (loan repayment)???
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