Kasik Co. budgeted the following cash receipts and cash disbursements for the first three months of next year.
|
|
Cash Receipts |
Cash Disbursements |
|
January |
$500,000 |
$450,000 |
|
February |
300,000 |
250,000 |
|
March |
400,000 |
500,000 |
According to a credit agreement with the company’s bank, Kasik 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 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.