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Page 1
Table B
Cash $200
Accounts receivable 2,905
Inventory 586
Current assets $3,691
Plant and equipment, net 1,176
Total assets $4,867
(a)The company was required to make estimated tax payments on the 15th of April, June, September,
and December. In 1993 it elected to base its estimated tax payments on the previous year's tax. The
balance of $88,000 was due on March 15, 1994.
Page 2
Table B
Page 3
Table C
Page 4
Table C
Page 5
Table C
Dec
940
1,115
Page 6
Exhibit 1
Exhibit 1 Pro Forma Balance Sheets Under Seasonal Production, 1994 (thousands of dollars
Actual
Dec. 31,
Note 1993 Jan. Feb. Mar.
Total liabilities
and equity $4,867 $3,700 $3,548 $3,315
Notes:
(a)Assumed maintenance of minimum $200,000 balance; includes excess cash in months when company is out
(c)Assumed inventories maintained at December 31, 1993 level for all of 1994.
(e)Assumed equal to 30% of the current month's sales and related to material purchases of $3,000,000 for 199
This represents a 30-day payment period. Since inventories are level, purchases will follow seasonal production
(f)Plug figure.
(g)Taxes payable on 1993 income are due on March 15, 1994. On April 15, June 15, September 15, and Decem
each of the estimated tax for 1994 are due. In estimating its tax liability for 1994, the company has the option
($139,000) for its estimate and making any adjusting tax payments in 1995. Alternatively, the company could
Toy World planned to use its prior year's tax liability as its estimate and to pay $35,000 in April, June, Septembe
Page 7
Exhibit 1
Page 8
Exhibit 1
Page 9
Exhibit 1
Nov. Dec.
$200 $200
4,425 3,400
586 586
$5,211 $4,186
1,176 1,176
$6,387 $5,362
$686 $334
1,677 942
33 40
50 50
$2,446 $1,366
375 350
3,566 3,646
$6,387 $5,362
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Exhibit 2
Exhibit 2 Pro Forma Income Statement Under Seasonal Production, 1994 (thousands of dollars)
(c)Toy World expected to earn a 4% annualized rate of return on average monthly cash balances.
(d)Negative figures are tax credits from operating losses, and reduced accrued taxes shown on balance sheet.
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Exhibit 2
s of dollars)
own on balance sheet. The federal tax rate on all earnings was 34%.
Page 12
Exhibit 2
Total
$10,000
7,000
$3,000
2,400
95
28
$533
182
$351
Page 13
Toy World, Inc.
Schedule of Changes Affecting Inventory, 1994
(thousands of dollars)
Notes:
Finished goods (completed) - COGS/12
Taxes paid - $88 (previous year's balance) on March, $35 on April,
Apr. May June July Aug. Sept.
Jan.
Inflows
Collections $1,965.00
After-tax interest income $0.44
Total $1,965.44
Outflows
Payments of accounts payable $282.00
Tax payments $0.00
Repayment of long-term debt $0.00
Operating expenses $209.58
Interest expense $9.25
Wages $292.50
Total $793.33
Net inflow (outflow) $1,172.11
Beginning cash $200.00
Ending cash before any loan increase or repayment $1,372.11
Loan availment $0.00
Loan repayment $752.00
End-of-month cash balance $620.11
Long-term debt
Balance, beg. $450.00
Repayment $0.00
Balance, end $450.00
Interest Expense
on long-term debt 9.625% $3.61
on notes payable 9.000% $5.64
$9.25
200
Notes:
Net sales - Estimated 1994 net sales per month
COGS - 65.1% of net sales per month
Operating expenses - $200*12 = $2,400 annually under seasonal productio
Interest expense -
Interest income -
Income taxes - 34% of profit (loss) before taxes
May June July Aug. Sept. Oct.
ally under seasonal production+ $ 115 additional storage/handling costs = $2,515 annually ($209.58 monthly)
Nov. Dec. Total
Notes:
Accounts receivable - Sales of the last two months
Net plant and equipment - Equal to depreciation expense
Accounts payable - 30% of sales ($3,000,000/12) = $250,000 per m
Notes payable - Balancing figure
Long-term debt (current portion) - $50
Long-term debt - $400 as of December 1993, with $25 being paid off
Shareholders' equity - Beginning equity + net income (loss) per mon
May June July Aug. Sept. Oct. Nov.
on expense
12) = $250,000 per month
$200.00
$3,400.00
$586.00
$4,186.00
$1,176.00
$5,362.00
$250.00
$767.47
$128.44
$50.00
$1,195.91
$350.00
$3,816.09
$5,362.00
$0.00