Carli Wainer is going to set up a new business in Bruges on 1 January 2021. She estimates that her first six months in business will be as follows:

(i) She will put €150,000 into the firm on 1 January 2021. (ii) On 1 January 2021 she will buy machinery €30,000, motor vehicles €24,000 and premises €75,000, paying for them immediately. (iii) All purchases will be effected on credit. She will buy €30,000 goods on 1 January and she will pay for these in February. Other purchases will be: rest of January €48,000; February, March, April, May and June €60,000 each month. Other than the €30,000 worth bought in January, all other purchases will be paid for two months after purchase, i.e. €48,000 in March. (iv) Sales (all on credit) will be €60,000 for January and €75,000 for each month after that. Customers will pay for goods in the third month after purchase, i.e. €60,000 in April. (v) Inventory on 30 June 2021 will be €30,000. (vi) Wages and salaries will be €2,250 per month and will be paid on the last day of each month. (vii) General expenses will be €750 per month, payable in the month following that in which they are incurred. (viii) She will introduce new capital of €75,000 on 1 June 2021. This will be paid into the business bank account immediately. (ix) Insurance covering the 12 months of 2021 of €26,400 will be paid for by cheque on 30 June 2021. (x) Local taxes will be paid as follows: for the three months to 31 March 2021 by cheque on 28 February 2022, delay due to an oversight by Wainer; for the 12 months ended 31 March 2022 by cheque on 31 July 2021. Local taxes are €8,000 per annum. (xi) She will make drawings of €1,500 per month by cheque. (xii) All receipts and payments are by cheque. (xiii) Depreciate motor vehicles by 20% per annum and machinery by 10% per annum, using the straight-line depreciation method. (xiv) She has been informed by her bank manager that he is prepared to offer an overdraft facility of €30,000 for the first year.

Required:

(a) Draft a cash budget (for the firm) month by month for the period January to June, showing clearly the amount of bank balance at the end of each month.

(b) Draft the projected statement of income for the first six months’ trading, and a statement of financial position as at 30 June 2021.

(c) Advise Carli on the alternative courses of action that could be taken to cover any cash deficiency that exceeds the agreed overdraft limit.