SECTION 1 You are considering buying a heating appliance business on 1 July 2022. Any debtors and creditors on that day will be your responsibility. You expect that the company will have a bank balance of E15,700 on 1 July 2022, the date you hope to buy the company. You wish to prepare a cash flow forecast before buying the business. The following information is available according to the present owner. Sales from 1 June 2022 to 31 October 2022 are forecasted to be as follows: Jun-22 E194,000 Jul-22 652,000 Aug-22 E82,000 Sep-22 E107,000 Oct-22 E220,000 60% of the sales are Cash Sales. There is a 4% discount given to all cash sales. The balance sales are credit sales. Credit sales are paid for in the month following the sale on credit. >Purchases (goods bought for resale) are expected to be 55% of the total sales as shown in the above table, for each month. 30% of the purchases are paid for in the same month (cash purchases). The balance (credit purchases) is paid in the month after the purchase. Direct labour costs, paid in the same month, is expected to be 15% of sales as shown in the above table. Production overheads are expected to be $6,500 per month and are paid in the same month. Selling and Administration Overheads are expected to be f4,500 per month and are paid in the same month. Tax of f11,000 is payable in August 2022 Fixed Assets costing $95,000 will need to be paid OPTION 1 payable in September 2022 O OPTION 2 payable in October 2022 with 5% interest surcharge o Prepare Cash flow based on OPTION 1 but consider OPTION 2 as part of the other questions.REQUIRED a) Based on the above information prepare a cashflow forecast for the period 1 July 2022 to 31 October 2022. (40 Marks) - use the workings template and the Cashflow templates. June 22 and July 22 figures have been inserted for convenience. b) Comment on any problem that you may foresee (5 Marks) c) Suggest solutions to any problem you may foresee (10 Marks) d) Comment on the advantages and disadvantages of preparing a cashflow statement. (5 Marks)WORKINGS TEMPLATE FOR CASHFLOW Jun-22 Jul-22 Aug-22 | Sep-22 Oct- 22 Total Sales E194,000 652,000 E82,000 f107,000 E220,000 Cash Sales 60%% of the sales are Cash Sales. 116,400 31,200 There is a 4%% discount given to all cash sales. (4,656) (1,248] Net Cash Sales 111,744 29,952 Credit Sales The balance (40%) sales are credit sales 77,600 20,800 Receipts from credit sales 77,600 Purchases Purchases are expected to be 55% of the total sales 106,700 28,600 30% of the purchases are paid for in the same month 32,010 8,580 70% Credit Purchases 74,690 20,020 The balance (70*%) is paid in the month after the purchase 74,690 Direct Labour Costs expected to be 15% of sales 7,800 Production Overheads expected to be $6,500 per month 6,500 Selling and Administration Overheads expected to be $4,500 per month 4,500 Tax Tax of f11,000 is payable in August 2020 Fixed Assets costing $95,000 payable in September 2020 The yellow cells will be inserted in the cash flowCashflow Forecast for period 1 July 2022 to 31 October 2022 Jul-22 Aug-22 Sep-22 Oct-22 Net Cash Sales 29,952 Receipts from credit sales 77,600 TOTAL RECEIPTS 107,552 LESS PAYMENTS 30% of the purchases are paid for in the same month 6,580 The balance (70%) is paid in the month after the purchase 74,690 Direct Labour Costs 7,800 Production Overheads 6,500 Selling and Administration Overheads 4,500 Tax Fixed Assets TOTAL PAYMENTS 102,070 NET RECEIPTS/(PAYMENTS) FOR THE MONTH 5,482 OPENING BALANCE 15,700 21,182 CLOSING BALANCE 21,182 The Yellow Cells are from the workings The Orange cells are calculated cells