The CEO wanted you not only to finalise the accounts for the year ending 31/12/2021 but also needed serious advice about the financial implications of ideas he had for the following year. The large IT company that supplied and supported the IT infrastructure had approached him with a proposal. They suggested that JOY sell them the system and outsource the entire function to them. He really liked the idea of getting rid of this headache and would need the cash if he was going to explore his other ideas. For the last two years JOY had not been happy with the property developers who leased the warehouse to JOY. The CEO felt that they were too expensive and did not honour the accepted responsibilities of a landlord. He had spoken to them and discovered that as landlords they were in fact keen to get out of industrial property altogether. They offered to sell the buildings to JOY for a reasonable price and the CEO liked the idea of not being held at ransom by them in the future. It was however a big decision for him to make and would necessitated JOY borrowing quite a lot of money for the first time ever. After discussions with you and his operating team, he asked you to prepare a budget projection based on the following information: Transaction volume would increase by 30%. Gladys were not prepared to put up their rate, so it would remain at K20 per order fulfilled JOY would sell their IT infrastructure for its book value of K34.8 million and the outsourced service provider would charge them a flat fee of K1 per transaction Cost of sales would rise to K7.50 per transaction as the IT cost of K1 would be added to the existing delivery charge of K6.50 which would not change from last year The warehouses would be purchased for an amount of K92 million and to help fund this CEO had sourced a long-term loan of K54 million. The interest on this loan would be K6.83 million for the year . The warehouses were not going to be depreciated at all, so the charge for the year ended 31/12/2021 would drop to K2.77 million Stock levels were predicted to increase to KO.72 million by year end The tax rate and company divided policy were not expected to change The CEO was determined to manage the Gladys account better during the following year and felt that he could get their average time to payment down to 51.5 days. However, as the delivery courier was pushing for even earlier payment the CEO felt DUE DATE: WEDNESDAY 22/06/2022 BEFORE 17:01 HOURS that it would be prudent to budget creditors as exactly the same nominal value as last year General and administrative costs would be reduced to K4.2 million for the year and this would enable the CEO to up marketing expenses to 4% of sales. He felt that it was a good idea to for him to look for new clients to reduce his dependency on Gladys and help utilize spare capacity The CEO still did not want to have an overdraft and wondered what cash position the above scenario would leave the company with. For the year to 31/12/2022 Prepare: (i) Projected statement of profit or Loss (ii) the statement of financial position