QUESTION B1
ABC Books Ltd has been formed to open a book shop in Cardiff.
Sales are expected to be as follows:
October £150,000, November £260,000, December £320,000.
90% of sales are for cash, the remainder of sales are on credit terms and collected 1
month later. The Shop has been stocked at a cost of £60,000 and this is paid in October,
inventory is replaced as it is sold so Closing Inventory should also be £60,000.
Inventory purchases are estimated to be 40% of sales each month purchased as sales
are made. Suppliers are paid one month in arrears.
One experienced staff member will be employed at a cost of £12,000 a month and each
of two directors will initially take £10,000 per month in salary. Overheads are forecast to
be £23,000 per month and paid one month in arrears.
Rent is £36,000 per year payable annually in advance.
Fixtures and Fittings will cost £100,000 and will be depreciated at 10% of cost per year
on a straight line basis. Finance will be through a ten year loan at 6% and monthly
repayments, of principal and interest will be £1,322 per month. The interest portion of the
repayments for the period, which appears on the Income Statement as an expense, is
£1,500.
Each director (owner) will contribute £60,000 as Share Capital.
Required:
1. Produce a Forecast Cash Flow Statement for the period October – December 2025
(15marks)
2. Produce a Forecast Income Statement for the period October – December 2025:
And
(8 marks)
3. Produce a Forecast Statement of Financial Position as at 31st December 2025.
(7 marks)
Section total: 30 marks