Question You have been provided with the 2020 financial statements of XYZ Inc. ("XYZ") (reproduced Obelow) and the following additional information (all amounts are h '000s): The demand for XYZ's products is highly seasonal, but the firm employs level production throughout the year because of its limited plant capacity Cost of goods sold is 70% of sales. Estimated costs of goods manufactured (COGM) for 2021 is 3,010. Due to level production, the value of goods produced each month is the same ICOGM =_436 -re Accounts payable, for the purchases of raw materials ("RM"), are paid in the month following purchase and owing to level production, are constant at $125 at the end of gach month 3,010 and Monthly production 3,010 -12 = $250.833] Thus, purchases each month= A25 JOURNAL ENTRIES: Ra Materrine Suventeng AP AP 12 Casle 125 Operating expenses are $46 per month. Depreciation expense (on non-manufacturing assets) is calculated on a straight-line basis and equals $525 per year. All sales are on credit and accounts receivable are collected 2 months after the sale Bad debts are negligible XYZ wants to maintain a MINIMUM cash balance of $150. The company has a $1.000 line of credit available at the bank that is used for any cash deficiencies (as needed). Any excess csh over the minimum required will be used to reduce the line of credit where applicable. Income taxes are levied at a rate of 50 percent and are paid three months after the year-end (for the full year). Long-term debt repayments of $100 and interest payments of $50 are made at the end of June and December. For simplicity, ignore interest on the line of credit Annual dividends of $15 are declared and paid at the end of December. XYZ Inc. Income Statement for the Yoar Ended December 31, 2020 (in '000s) $4,149, 2.904 $1,245 Sales Cost of goods sold Gross margin Operating expenses Depreciation expense Income before interest and taxes Interest expense Income before taxes Income tax expense Net income 552 525 $168 100 $68 34 $34 4-31 XYZ Inc. Balance Sheet as at December 31, 2020 (in '000s) $150 ASSETS Cash 1,750 310 Accounts receivable LJu + Inventory Total current assets Property, plant and equipment ("PP&E") Less: Accumulated depreciation PP&E, net Total assets $2,210 $10,500 3,900 6.600 $8.810 LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable Bank loan (line of credit) Interest payable Income tax payable [paidA/312224 Current portion of long-term debt $125 215 34 200 $574 Total current liabilities Long-term debt (net of current portion) Total liabilities Common shares (Capital stock) Retained earnings Total liabilities and shareholders' equity 3.400 3,974 1,800 3.036 $8.810 ACTUAL sales for 2020 (in '000s): November $820 December $930 PROJECTED (estimated) sales for 2021 (in 000s): January February March $55 July August September $80 $550 $55 $55 $5 $690 April May October $830 $60 November $850 $960 June $60 20 December REQUIRED: Prepare Pro-Forma financial statements for the first quarter of 2021 and Mar 31 "HIGHLY SEASONAL": January to July Sales 430 = 9.77% of yearly sales August to December Sales - = 90.23% of yearly sales Total Sales $4.300 4-32 We prepared the statements for Quarter 1 (Q1) in class. Prepare the statements for Q2 (April 1- June30) based on the following assumptions: April's sales. $100.000: May's sales. $150.000: and. June's sales. $200.000. Indicate your answers on page 2 and show your work on page 3. EVERYTHING ELSE STAYS THE SAME AS IN THE QUESTION IN THE NOTES. PROJECTED (estimated) sales for 2021 (in "000s): January $55 July February $55 $100 $150 $80 $550 $690 $830 S850 $55 August March September October April May June November $200 December $960 Since we completed Quarter 1 in class, start with those balances and Prepare Pro-Forma financial statements for the second quarter of 2021. ASSIGNMENT #2 - Chapter 4 (Part 2) NAME (Last, First): (12 marks) XYZ Company PRO FORMA Quarterly Student No.: Income Statements Q2 Q1 $165,000 115.500 49,500 138,000 131.250 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense Income before interest & taxes (219,750) Interest expense Income before taxes Income (expense)/recovery Net Income 25.000 (244.750) tax 122.375 S(122.375) PRO FORMA Quarterly Balance Sheets 02 $815,500 110,000 947,000 10.500,000 4,031.250) $8.341.250 3125.000 01 Cash Accounts receivable Inventory Plant & equipment Accumulated depreciation Total Assets Accounts payable Line of credit 25.000 122,375) Interest payable Taxes payable Current portion of LT debt 200,000 Long-term debt Common shares Retained earnings Total Liabilities & Sh. Equity$8.341.250 SHOW YOUR WORK: 3,400,000 1,800,000 2.913.625