John & Sarah Knight will commence trading in February 2021 with Capital of £60,000. They will spend £150,000 on equipment. They have arranged a loan of £120,000 with interest at 12% p.a. over five years. Repayments of capital and interest are £2,433 each month. The loan interest for the period included in the repayments is £2,367. Sales are expected to be as follows: March: £120,000; April: £120,000; May: £150,000; June: £175,000; July: £175,000 40% of sales are for cash and attract a discount of 5%. The remainder of sales is on credit terms and collected 1 month later. Opening inventory of £60,000 is paid for in March 2021, further inventory is purchased at 45% of sales each month. Suppliers are paid one month in arrears. Closing inventory should also be £60,000. Wages are forecasted to be £10,000 per month, payable in the month they are incurred. Overheads (excluding depreciation) are forecast to be £12,500 per month and paid in the month they are incurred. Rent is £24,000 per year payable quarterly in advance. Equipment will be depreciated at 10% of cost per year. Forecast monthly cash flow statement for the 3 months to 30th April 2021 and What is the impact of giving 90 days credit to the cash flow and to the annual profit
John & Sarah Knight will commence trading in February 2021 with Capital of £60,000. They will spend £150,000 on equipment.
They have arranged a loan of £120,000 with interest at 12% p.a. over five years. Repayments of capital and interest are £2,433 each month. The loan interest for the period included in the repayments is £2,367.
Sales are expected to be as follows:
March: £120,000; April: £120,000; May: £150,000;
June: £175,000; July: £175,000
40% of sales are for cash and attract a discount of 5%. The remainder of sales is on credit terms and collected 1 month later.
Opening inventory of £60,000 is paid for in March 2021, further inventory is purchased at 45% of sales each month. Suppliers are paid one month in arrears. Closing inventory should also be £60,000.
Wages are forecasted to be £10,000 per month, payable in the month they are incurred.
Rent is £24,000 per year payable quarterly in advance.
Equipment will be depreciated at 10% of cost per year.
Forecast monthly
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