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QUESTION B 2 Kerry has started a new business in part of a converted warehouse. She sold her inherited property, making 8 0 , 0

QUESTION B2
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 3.5% 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.
Kerrys 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.
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