Kasik Company

II. Preparation of cash budgets (for three periods) 

Kasik Company 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 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.