The Volkswagen Group Company is preparing its cash budget for the months of April and May. The
Question:
The Volkswagen Group 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, Volkswagen Group will invest any cash in excess of its desired end-of-month cash balance in UK £. Treasury bills. Volkswagen Group 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. Monthly collection and disbursement patterns are expected to be:
• 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
March April May
Sales £40,000 £50,000 £100,000
Accounts payable 30,000 40,000 40,000
Payroll 60,000 70,000 50,000
Other disbursements 25,000 30,000 10,000
In April, what will be the result of Raymar's budget ?