QUESTION B$2$

Kerry has started a new business in part of a converted warehouse. She sold her

inherited property, making $80,000,$ and is currently renting a room so that she can put

the money she's made into the new business. $60,000$ was used as a deposit on the

purchase of her space in the warehouse building, and she obtained a commercial

mortgage of $80,000$ for the warehouse of the purchase price. The interest rate on the

mortgage is $3\mathrm{.}5\%$ and Kerry has negotiated a deal with the lender whereby she does

not have to start paying off the capital sum until $2022.$ The monthly interest$-$only

payments are $234.$

The business supplies cakes and related goods to coffee shops. Although the

customers almost always eventually pay, Kerry often has problems in collecting the

cash due to her. The pattern of cash payment by customers, on average, is as follows:

So$,$ for example, $30\%$ of the value of sales in March will actually be received in cash in

March, $30\%$ will be received in cash in April, and so on$.$ Kerry is preparing budgets for

the six months ending $30$ June $2020.$ Actual invoiced sales for the September $-$

December $2019$ period are as follows:

Kerry expects to invoice sales as follows in each of the six months to $30$

June $2020$:

Expenses include the following:

Drawings. She plans to draw $8,000$ in February, May and June.

Rent of $5,200$ each quarter is payable in March, June, September and December.Two second$-$hand vans due for delivery in September and October will be paid for in March and June at a cost of $16,000,$ and $21,000,$ respectively.

Kerry$$s remaining $20,000$ were used as following; Kerry paid $15,000$ for materials used in production in December. The initial round of press adverts costs $5,000$ was paid in December.

Business premises costs. Business rates are to be paid monthly; the cost is $500$ per month. However, from April the business rates will increase by $20\%.$

Other expenses. Kerry estimates that a total of $28,860$ in other expenses will be paid each month. The other expenses will increase to $30,500$ from May onwards.

No other cash inflows or outflows are expected in the $6$ months to $30$ June $2020.$

At $31$ December $2019$ the business has a bank overdraft of $13,050.$ It is permitted a maximum overdraft at any one time of $20,000.$

Required:

Prepare a cash flow forecast for the $6$ months to $30$ June $2020,$ noting the maximum forecast overdraft.