Revision question on preparation of forecasted income statement and statement of financial position.

You have been approached by a recently established business enterprise. This business is seeking financial accommodation from its bankers who are prepared to provide overdraft facilities. Before final approval can be given, the figure maximum overdraft is required and the time in the year when this well arise. The forecast cash balance at the end of the first period of trading is also required. The following facts and are obtained from the company;



  1. Trading will commence on 1st March 2015 when Tshs 8,000,000 cash will be introduced into the business.
  2. Business premise costing Tshs 22,000,000 (inclusive of rates to 31st March 2015) will be paid for the commencement of trading. A mortgage of the business premises has been negotiated for the sum of Tshs 12,000,000 receivable on 31st March 2015. This amount is to be paid over two years at quarterly intervals by equal installment of capital, plus interest at the rate of 12% per annum on the balance outstanding at the each quarter. The first repayment plus interest will be made on 30st June 2015.
  3. A part of the premises will be let on a five year tenancy at Tshs 200,000 per calendar month(inclusive of property rates) payable quarterly in advance as from 1st April 2015.
  4. Sales are estimated at Tshs 8,000,000 per month for the first quarter, Tshs 12,000,000 per month for the second quarter and thereafter Tshs 24,000,000 per month. All sales are on credit and will be paid for by the month following that in which sales have taken place.



  1. A minimum stocks of goods the value of Tshs 12,000,000 will be purchased in March 2015 and will be maintained throughout the period.
  2. Trade creditors will allow accounts to be settled in the month following that in which goods are supplied.
  3. Insurance are estimated to be Tshs 240,000 per annum payable on 1st March 2015 in advance.
  4. Gross profit margin on cost is expected to be 25% throughout the period.
  5. Property rates are estimated to be Tshs 360,000 per annum payable half-yearly in advance on 1st April and 1st October.
  6. Other business expanses are expected to be Tshs 1,000,000 per month to be paid at the end of the month following that in which they are incurred.
  7. Private drawing are estimated at Tshs 400,000 per month except in the months of July and October when additional drawings of Tshs 200,000 in each month will be made.

REQUIRED:
Prepare
(a) Monthly cash flow forecast for the period 1st March 2015 to 31st December 2015.
(b) Forecasted income statement of the above period.
(c) Forecasted SOFP as at 31st December 2015.

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