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The Raymar Company is preparing its cash budget for the months of April and May. The firm has established a $200,000 line of credit with
The Raymar Company is preparing its cash budget for the months of April and May. The firm has established a $200,000 line of credit with its bank at a 12% annual rate of interest on which borrowings for cash deficits must be made in $10,000 increments. There is no outstanding balance on the line of credit loan on April 1. Principal repayments are to be made in any month in which there is a surplus of cash. Interest is to be paid monthly. If there are no outstanding balances on the loans, Raymar will invest any cash in excess of its desired end-of-month cash balance in U.S. Treasury bills. Raymar intends to maintain a minimum balance of $100,000 at the end of each month by either borrowing for deficits below the minimum balance or investing any excess cash. Expected monthly collection and disbursement patterns are shown below. O Collections: 50% of the current month's sales budget and 50% of the previous month's sales budget. Accounts Payable Disbursements: 75% of the current month's accounts payable budget and 25% of the previous month's accounts payable budget. All other disbursements occur in the month in which they are budgeted. Budget Information Sales Accounts payable Payroll Other disbursements March $40,000 30,000 60,000 25,000 April $50,000 40,000 70,000 30,000 May $100,000 40,000 50,000 10,000 In April, Raymar's budget will result in a need to borrow money, How much the company should be borrow
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