Toy World Level Production Balance Sheet and Income Statement

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Table A

Table A: Condensed Income Statements, 1991-1993 (thousands of dollars)

1991

1992

1993

Net sales Cost of goods sold Gross profit Operating expenses Interest expense Interest income Profit before taxes Federal income taxes Net profit

$5,213 3,597 $1,616 1,199 68 20 $369 125 $244

$6,167 4,440 $1,727 1,542 75 15 $125 43 $82

$7,967 5,577 $2,390 1,912 85 16 $409 139 $270

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Table B

Table B: Balance Sheet at December 31, 1993 (thousands of dollars)

Cash Accounts receivable Inventory Current assets Plant and equipment, net Total assets Accounts payable Notes payable, bank Accrued taxes(a) Long-term debt, current portion Current liabilities Long-term debt Shareholders' equity Total liabilities and shareholders' equity

$200 2,905 586 $3,691 1,176 $4,867 $282 752 88 50 $1,172 400 3,295 $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.

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Table C

Table C: Monthly Sales Data (thousands of dollars)

Sales 1993 Actual 1994 Projected

Total $7,967 $10,000

Jan $64 $120

Feb 88 140

Mar 96 160

Apr 88 140

May 87 140

Jun 95 140

Jul 96 160

Aug 1,251 1,620

Sep 1,474 1,840

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Table C

Oct 1,723 2,140

Nov 1,965 2,285

Dec 940 1,115

Page 2

Exhibit 1

Exhibit 1

Pro Forma Balance Sheets Under Seasonal Production, 1994 (thousands of dollars)

Note

Actual Dec. 31, 1993

Jan.

Feb.

Mar.

Apr.

May

June

July

Aug.

Cash Accounts receivable Inventory Current assets Net plant and equipment Total assets

(a) (b) (c)

$200 2,905 586 $3,691

$878 1,060 586 $2,524 1,176 $3,700 $36 0 31 50 $117 400 3,183

$1,526 260 586 $2,372 1,176 $3,548 $42 0 (23) 50 $69 400 3,079

$1,253 300 586 $2,139 1,176 $3,315 $48 0 (162) 50 ($64) 400 2,979

$1,054 300 586 $1,940 1,176 $3,116 $42 0 (251) 50 ($159) 400 2,875

$915 280 586 $1,781 1,176 $2,957 $42 0 (305) 50 ($213) 400 2,770

$696 280 586 $1,562 1,176 $2,738 $42 0 (394) 50 ($302) 375 2,665

$527 300 586 $1,413 1,176 $2,589 $48 0 (448) 50 ($350) 375 2,564

$200 1,780 586 $2,566 1,176 $3,742 $486 433 (352) 50 $617 375 2,750

(d)

1,176 $4,867 $282 752 88 50 $1,172 400 3,295

Accounts payable (e) Notes payable, bank (f) Accrued taxes (g) Long-term debt, current portion Current liabilities Long-term debt Shareholders' equity Total liabilities and equity

(h)

$4,867

$3,700

$3,548

$3,315

$3,116

$2,957

$2,738

$2,589

$3,742

Notes: (a)Assumed maintenance of minimum $200,000 balance; includes excess cash in months when company is out of debt. (b)Assumed 60-day collection period. (c)Assumed inventories maintained at December 31, 1993 level for all of 1994. (d)Assumed equipment purchases equal to depreciation expense. (e)Assumed equal to 30% of the current month's sales and related to material purchases of $3,000,000 for 1994 as against sales of $10 million. 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 December 15, 1994, payments of 25% each of the estimated tax for 1994 are due. In estimating its tax liability for 1994, the company has the option of using the prior year's tax liability ($139,000) for its estimate and making any adjusting tax payments in 1995. Alternatively, the company could estimate its 1994 tax liability directly. Toy World planned to use its prior year's tax liability as its estimate and to pay $35,000 in April, June, September, and December. (h)To be repaid at the rate of $25,000 each June and December.

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Exhibit 1

Sept.

Oct.

Nov.

Dec.

$200 3,460 586 $4,246 1,176 $5,422 $552 1,741 (271) 50 $2,072 375...
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