Question

Create a cash flow with the following information:

Sales Projection for the month is $30,000

75 % of sales are expected to be collected in current month and the remaining 25% to be collected in the following month.

Cost of Goods equals =45% of sales (Materials) 15% of sales (direct labor) 15% of sales (subcontractors)

*Materials and subcontractors and paid in the following month while direct labor is paid in the month worked*

The owners deposit $20,000 in the bank at the beginning of October. $100 of these funds will be used to pay for their common shares and the remaining $19,900 will be set up as a loan from the share holder with no interest and no set terms of repayment.

The corporate income tax is 17%

Operating Expenses

Depreciation

Truck	cost $38,000, useful life 5 years, residual value 20% of costs
Tools	cost $18,000, useful life 8 years
Office Furniture	cost $5000, useful life 3 years
Building	Cost $50,000 useful life 20 years

Other expenses

Insurance $8400 annually

interest on long term debt 4.25% for 20 year amortization

property tax -annual taxes $420

Administrative salaries	$                                            4,800.00
Accounting & legal	$                                            4,000.00
Advertising & promotions	$                                            3,000.00
Business fees & licenses	$                                                         -
Depreciation Expenses	$                                                661.39
Insurance	$                                                700.00
interest & bank charges	$                                                  35.00
interest on long term debt	$                                                         -
office supplies	$                                                100.00
property tax	$                                                  35.00
motor vehicles expenses	$                                                450.00
repair & maintenance	$                                                  50.00
telephone	$                                                165.00
travel & entertainment	$                                                  40.00
Utilities	$                                                250.00

Answer 1

	Projected Cash Flows statement
	Particulars	October	November
	Opening Balance	-	24375
Add:	Proceeds from issue of common stock	100
Add:	Proceeds from loan raised from owners	19900
Add:	Collection From Debtors	22500	7500
Less:	Payment for materials	-	13500
Less:	Payment for Subcontractors	-	4500
Less:	Payment for Direct Labours	4500
Less:	Admin Sal	4800
Less:	Accounting & Legal	4000
Less:	Advt & promotion	3000
Less:	Insurance expenses	700
Less:	Interest & Bank Chgs	35
Less:	Office Supplies	100
Less:	Property Tax	35
Less:	Motor Vehicle Expenses	450
Less:	Repair & Maintenance	50
Less:	Telephone	165
Less:	Travel & Entertainment	40
Less:	Utilities	250
	Closing Balnce	24375

Assumptions: 1) Due to lack of Information, projected cash flow statement is prepared for the month of October only, as Owners have deposited the abovementioned amount in October.

2) All expenses, unless stated particularly about payment basis are assumed to be paid in the same monthh as incurred.

3) Due to lack of information, Opening Balance in the month of October is taken as Nil.

4) Interest on long term debt is not included in the statement because the debt amount is not stated in the question.

5) Deprciation expenses is of non cash nature & hence not included in the statement