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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 B
Kerry has started a new business in part of a converted warehouse. She sold her
inherited property, making and is currently renting a room so that she can put
the money she's made into the new business. was used as a deposit on the
purchase of her space in the warehouse building, and she obtained a commercial
mortgage of for the warehouse of the purchase price. The interest rate on the
mortgage is and Kerry has negotiated a deal with the lender whereby she does
not have to start paying off the capital sum until The monthly interestonly
payments are
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, of the value of sales in March will actually be received in cash in
March, will be received in cash in April, and so on Kerry is preparing budgets for
the six months ending June Actual invoiced sales for the September
December period are as follows:
Kerry expects to invoice sales as follows in each of the six months to
June :
Expenses include the following:
Drawings. She plans to draw in February, May and June.
Rent of each quarter is payable in March, June, September and December.Two secondhand vans due for delivery in September and October will be paid for in March and June at a cost of and respectively.
Kerrys remaining were used as following; Kerry paid for materials used in production in December. The initial round of press adverts costs was paid in December.
Business premises costs. Business rates are to be paid monthly; the cost is per month. However, from April the business rates will increase by
Other expenses. Kerry estimates that a total of in other expenses will be paid each month. The other expenses will increase to from May onwards.
No other cash inflows or outflows are expected in the months to June
At December the business has a bank overdraft of It is permitted a maximum overdraft at any one time of
Required:
Prepare a cash flow forecast for the months to June noting the maximum forecast overdraft.
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