Condensed Income and Balance Sheet Data 1991-1993

Table A Condensed Income Statements, 1991-1993 (thousands of dollars)
1991 1992 1993
Net sales $5,213 $6,167 $7,967

Cost of goods sold 3,597 4,440 5,577
Gross profit $1,616 $1,727 $2,390
Operating expenses 1,199 1,542 1,912
Interest expense 68 75 85
Interest income 20 15 16
Profit before taxes $369 $125 $409
Federal income taxes 125 43 139
Net profit $244 $82 $270
Table B Balance Sheet at December 31, 1993 (thousands of dollars)
Cash $200
Accounts receivable 2,905
Inventory 586
Current assets $3,691
Plant and equipment, net 1,176
Total assets $4,867
Accounts payable $282

Notes payable, bank 752
Accrued taxes(a) 88
Long-term debt, current portion 50
Current liabilities $1,172
Long-term debt 400
Shareholders' equity 3,295
Total liabilities and
shareholders' equity $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.
Table C Monthly Sales Data (thousands of dollars)
Sales Projected
1993 1994
January $64 $120
February 88 140
March 96 160
April 88 140
May 87 140
June 95 140
July 96 160
August 1,251 1,620
September 1,474 1,840
October 1,723 2,140
November 1,965 2,285
December 940 1,115
April, June, September,
revious year's tax. The
Exhibit 2 Pro Forma Income Statement Under Seasonal Production, 19
Jan. Feb. Mar. Apr.
Net sales $120 $140 $160 $140

Cost of goods sold(a) 84 98 112 98
Gross profit $36 $42 $48 $42
Operating expenses(b) 200 200 200 200

Interest expense 7 4 4 4
Interest income(c) 2 4 5 4
Profit (loss) before taxes ($169) ($158) ($151) ($158)

Income taxes(d) (57) (54) (51) (54)
Net Profit ($112) ($104) ($100) ($104)
(a)Assumed cost of goods sold equal to 70% sales.

(b)Assumed to be same for each month throughout the year.
(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.
Exhibit 1 Pro Forma Balance Sheets Under Seasonal Production, 1994 (thousands
Actual
Dec. 31,
1993 Jan. Feb. Mar. Apr.
Cash(a) $200 $878 $1,526 $1,253 $1,054

Accounts receivable(b) 2,905 1,060 260 300 300
Inventory(c) 586 586 586 586 586
Current assets $3,691 $2,524 $2,372 $2,139 $1,940

Net plant and
equipment(d) 1,176 1,176 1,176 1,176 1,176
Total assets $4,867 $3,700 $3,548 $3,315 $3,116
Accounts payable(e) $282 $36 $42 $48 $42

Notes payable, bank(f) 752 0 0 0 0
Accrued taxes(g) 88 31 (23) (162) (251)
Long-term debt,
current portion 50 50 50 50 50
Current liabilities $1,172 $117 $69 ($64) ($159)
Long-term debt(h) 400 400 400 400 400

Shareholders' equity 3,295 3,183 3,079 2,979 2,875
Total liabilities
and equity $4,867 $3,700 $3,548 $3,315 $3,116
(a)Assumed maintenance of minimum $200,000 balance; includes excess cash in months when company is out
(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
This represents a 30-day payment period. Since inventories are level, purchases will follow seasonal produc
(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 opt
($139,000) for its estimate and making any adjusting tax payments in 1995. Alternatively, the company co
Toy World planned to use its prior year's tax liability as its estimate and to pay $35,000 in April, June, Septe
(h)To be repaid at the rate of $25,000 each June and December.
r Seasonal Production, 1994 (thousands of dollars)
May June July Aug. Sept. Oct. Nov. Dec.
$140 $140 $160 $1,620 $1,840 $2,140 $2,285 $1,115

98 98 112 1,134 1,288 1,498 1,600 780
$42 $42 $48 $486 $552 $642 $685 $335
200 200 200 200 200 200 200 200

4 4 3 5 12 17 17 14
3 3 2 1 1 1 1 1
($159) ($159) ($153) $282 $341 $426 $469 $122

(54) (54) (52) 96 116 145 159 42
($105) ($105) ($101) $186 $225 $281 $310 $80
cash balances.
es shown on balance sheet. The federal tax rate on all earnings was 34%.
oduction, 1994 (thousands of dollars)
May June July Aug. Sept. Oct. Nov. Dec.
$915 $696 $527 $200 $200 $200 $200 $200

280 280 300 1,780 3,460 3,980 4,425 3,400
586 586 586 586 586 586 586 586
$1,781 $1,562 $1,413 $2,566 $4,246 $4,766 $5,211 $4,186
1,176 1,176 1,176 1,176 1,176 1,176 1,176 1,176
$2,957 $2,738 $2,589 $3,742 $5,422 $5,942 $6,387 $5,362
$42 $42 $48 $486 $552 $642 $686 $334

0 0 0 433 1,741 1,745 1,677 942
(305) (394) (448) (352) (271) (126) 33 40
50 50 50 50 50 50 50 50
($213) ($302) ($350) $617 $2,072 $2,311 $2,446 $1,366
400 375 375 375 375 375 375 350

2,770 2,665 2,564 2,750 2,975 3,256 3,566 3,646
$2,957 $2,738 $2,589 $3,742 $5,422 $5,942 $6,387 $5,362
months when company is out of debt.
hases of $3,000,000 for 1994 as against sales of $10 million.

es will follow seasonal production
5, September 15, and December 15, 1994, payments of 25%

994, the company has the option of using the prior year's tax liability
Alternatively, the company could estimate its 1994 tax liability directly.
$35,000 in April, June, September, and December.
Total
$10,000
7,000
$3,000
2,400
95
28
$533
182
$351
Exhibit 2
Net sales
Cost of goods sold(a)
Gross profit
Operating expenses(b)
Interest expense
Long term debt interest expense
Interest income(c)
Profit (loss) before taxes

Income taxes(d) tax rate
Net Profit
(a)Assumed cost of goods sold equal to 70% sales.

(b)Assumed to be same for each month throughout the year.
(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.
Inventory Calculation
beginning inventory
add monthly production will change under level production
subtract cost of good sold
ending inventory-balance sheet account for the month
Exhibit 1
Minimum cash balance required

excess cash in months when there is no bank debt
Accounts receivable(b) two months of sales
Inventory(c)
Current assets
Net plant and
equipment(d)
Total assets
Accounts payable(e)
Notes payable, bank(f)
Accrued taxes(g)
Long-term debt,
current portion stay the same
Current liabilities
Long-term debt(h) repaid by 25000 june and dec

Shareholders' equity include retained earnings
Total liabilities
and equity
calculating the plugs

assets that need to be funded cannot include plug
liabilities and equity available for funding cannot include plug
aditional funds needed
Plug for excess cash
Plug for bank debt nots payable
(a)Assumed maintenance of minimum $200,000 balance; includes excess cash in months when company is out
(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
This represents a 30-day payment period. Since inventories are lev
(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 lia
($139,000) for its estimate and making any adjusting tax payments
Toy World planned to use its prior year's tax liability as its estimate
(h)To be repaid at the rate of $25,000 each June and December.
Pro Forma Income State
Jan.
Method of forecast Assumptions

assumption of mgt $120
% of sales 70% 84
$36
same every month 200 200

on average debt balances 9% annually 0.75% 3.4
on average debt balances 9 5/8% annually 0.802% #VALUE!
4% annual 0.33% #VALUE!
#VALUE!
34% #VALUE!
#VALUE!
n on average monthly cash balances.

d reduced accrued taxes shown on balance sheet. The federal tax rate on all earnings was 34%.
1993-dec Jan.
586
der level production 84
84
586 586
Pro Forma Balance Sheets Under S
Actual
Dec. 31,
1993 Jan.
200 $200 $200

plug #VALUE!
2,905 1,060
586 586
$3,691 #VALUE!
current expenditures =monthly depreciation 1,176 1,176
$4,867 #VALUE!
percent of production 42.86% $282 $36

plug 752 #VALUE!
repay 88 in march and 35 in April june, sept, december 88 #VALUE!
50 50
$1,172 #VALUE!
june and dec 25 400 400

3,295 #VALUE!
$4,867 #VALUE!
$3,022
#VALUE!
#VALUE!
#VALUE!
#VALUE!
ludes excess cash in months when company is out of debt.
vel for all of 1994.
elated to material purchases of $3,000,000 for 1994 as against sales of $10 million.
a 30-day payment period. Since inventories are level, purchases will follow seasonal production
4. On April 15, June 15, September 15, and December 15, 1994, payments of 25%
mated tax for 1994 are due. In estimating its tax liability for 1994, the company has the option of using the prior year's tax
s estimate and making any adjusting tax payments in 1995. Alternatively, the company could estimate its 1994 tax liabilit
ed to use its prior year's tax liability as its estimate and to pay $35,000 in April, June, September, and December.
Forma Income Statement Under Seasonal Production, 1994 (thousands of dollars)
Feb. Mar. Apr. May June July Aug.
$140 $160 $140 $140 $140 $160 $1,620

98 112 98 98 98 112 1,134
$42 $48 $42 $42 $42 $48 $486
200 200 200 200 200 200 200

3.4 3.4 3.4 3.4 3.3 3.2 3.2
#VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE!


586 586 586 586 586 586 586
98 112 98 98 98 112 1,134
98 112 98 98 98 112 1,134
586 586 586 586 586 586 586
ance Sheets Under Seasonal Production, 1994 (thousands of dollars)
$200 $200 $200 $200 $200 $200 $200

260 300 300 280 280 300 1,780
586 586 586 586 586 586 586
1,176 1,176 1,176 1,176 1,176 1,176 1,176
$42 $48 $42 $42 $42 $48 $486

50 50 50 50 50 50 50
400 400 400 400 375 375 375

$2,222 $2,262 $2,262 $2,242 $2,242 $2,262 $3,742

ing the prior year's tax liability

ate its 1994 tax liability directly.
d December.
Sept. Oct. Nov. Dec. Total
$1,840 $2,140 $2,285 $1,115 $10,000

1,288 1,498 1,600 781 $7,000
$552 $642 $686 $335 $3,000
200 200 200 200 $2,400

3.2 3.2 3.2 3.1 $39
#VALUE! #VALUE! #VALUE! #VALUE! #VALUE!

#VALUE! #VALUE! #VALUE! #VALUE!
Sept. Oct. Nov. Dec.

586 586 586 586
1,288 1,498 1,600 781 7,000
1,288 1,498 1,600 781
586 586 586 586
Sept. Oct. Nov. Dec.
$200 $200 $200 $200

3,460 3,980 4,425 3,400
586 586 586 586
1,176 1,176 1,176 1,176
$552 $642 $686 $335

50 50 50 50
375 375 375 350

$5,422 $5,942 $6,387 $5,362


Condensed Income and Balance Sheet Data 1991-1993

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Condensed Income and Balance Sheet Data 1991-1993

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

1991 1992 1993

Net sales $5,213 $6,167 $7,967

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

Accounts payable $282

Table C Monthly Sales Data (thousands of dollars)

Jan. Feb. Mar. Apr.

Net sales $120 $140 $160 $140

Gross profit $36 $42 $48 $42

Operating expenses(b) 200 200 200 200

Profit (loss) before taxes ($169) ($158) ($151) ($158)

Net Profit ($112) ($104) ($100) ($104)

(a)Assumed cost of goods sold equal to 70% sales.

Cash(a) $200 $878 $1,526 $1,253 $1,054

Current assets $3,691 $2,524 $2,372 $2,139 $1,940

Total assets $4,867 $3,700 $3,548 $3,315 $3,116

Accounts payable(e) $282 $36 $42 $48 $42

Current liabilities $1,172 $117 $69 ($64) ($159)

Long-term debt(h) 400 400 400 400 400

May June July Aug. Sept. Oct. Nov. Dec.

$140 $140 $160 $1,620 $1,840 $2,140 $2,285 $1,115

$42 $42 $48 $486 $552 $642 $685 $335

200 200 200 200 200 200 200 200

($159) ($159) ($153) $282 $341 $426 $469 $122

($105) ($105) ($101) $186 $225 $281 $310 $80

oduction, 1994 (thousands of dollars)

May June July Aug. Sept. Oct. Nov. Dec.

$915 $696 $527 $200 $200 $200 $200 $200

$1,781 $1,562 $1,413 $2,566 $4,246 $4,766 $5,211 $4,186

1,176 1,176 1,176 1,176 1,176 1,176 1,176 1,176

$2,957 $2,738 $2,589 $3,742 $5,422 $5,942 $6,387 $5,362

$42 $42 $48 $486 $552 $642 $686 $334

($213) ($302) ($350) $617 $2,072 $2,311 $2,446 $1,366

400 375 375 375 375 375 375 350

$2,957 $2,738 $2,589 $3,742 $5,422 $5,942 $6,387 $5,362

months when company is out of debt.

hases of $3,000,000 for 1994 as against sales of $10 million.

5, September 15, and December 15, 1994, payments of 25%

Profit (loss) before taxes

(a)Assumed cost of goods sold equal to 70% sales.

Minimum cash balance required

Long-term debt(h) repaid by 25000 june and dec

calculating the plugs

Method of forecast Assumptions

same every month 200 200

n on average monthly cash balances.

Pro Forma Balance Sheets Under S

200 $200 $200

current expenditures =monthly depreciation 1,176 1,176

percent of production 42.86% $282 $36

june and dec 25 400 400

ludes excess cash in months when company is out of debt.

vel for all of 1994.

Feb. Mar. Apr. May June July Aug.

$140 $160 $140 $140 $140 $160 $1,620

$42 $48 $42 $42 $42 $48 $486

200 200 200 200 200 200 200

#VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE!

#VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE!

Feb. Mar. Apr. May June July Aug.

ance Sheets Under Seasonal Production, 1994 (thousands of dollars)

Feb. Mar. Apr. May June July Aug.

$200 $200 $200 $200 $200 $200 $200