CASE STUDY PART 1 When Adam is made redundant, he decides to run a business selling e-bikes. In order to do this, he sets up a limited company, Ebikum Limited. He plans to deposit 100 in the company's bank account on 1 January 2021 and issue 100 shares, with a nominal value of 1 each, in his own name. He also plans to lend the company 18,000 using his redundancy payment Adam will rent premises for his business at 2,200 a month. He will pay 8,000 for tools and equipment. At the start, he will pay 8,000 for bicycles and components for resale. At the end of the first month, he will pay 4,000 for more bicycles and components. At the end of the second month, he will pay 4,600 for bicycles and components. At the end of the third month he hopes to buy 5,000 of bicycles and components on credit, paying the following month At the outset, he will hire an assistant, at a cost of 2,000 a month, to work in the shop, whilst he does some work in the shop and all the administration. He will pay himself 1,000 a month in salary and plans to take further income as dividends. He estimates that he will use 150 worth of electricity per month, paid quarterly in arrears. At the beginning of January he will pay 1,320 for 12 months' insurance. Other expenses paid for during the period will be: per month 250 Advertising Mileage 200 He expects his first three months' sales to be as follows January 8,000 February 9,000 March 10,000 At the end of 3 months he expects to have unsold inventory, which would had cost him 8,000. He will depreciate non-current assets at a rate of 20% of original cost per year SECTION C This question is based on Part 1 of the case study 7. Calculate the breakeven point, in , for the quarter (i.e. The first 3 months) (10 marks) At the end of 3 months he expects to have unsold inventory, which would had cost him 8,000. He will depreciate non-current assets at a rate of 20% of original cost per year Cash budget for January March 2021 Jan Feb Mar Total Cash in Shares Loan Sales 100 18,000 8,000 100 18,000 9,000 10,000 27,000 Total 26,100 9,000 10,000 45,100 2,200 2,200 Cash out Rent Tools Goods for resale Assistant Adam's salary Electricity Insurance Advertising Mileage Total 2,200 8,000 12,000 2,000 1,000 4,600 2,000 1,000 6,600 8,000 16,600 6,000 3,000 2,000 1,000 1,320 250 250 200 200 26,970 10,250 1,320 250 750 200 600 5,650 42,870 2,230 Net cash in Opening balance Closing balance (870) (1,250) 4,350 0 (870) (2,120) (870) (2,120) 2,230