The Roxy Company starts the year with a 'bang' The Firm makes toy guns--just what everyone 'needs'. It makes them for $1.00 each and sells them for $1.50. The Roxy Company keeps an inventory level (at the end of the month) equals to shipments of the current month, pays its bills immediately, and collects cash from customers the following month after the sale. The sales manager predicts a steady increase in sales of 500 toy guns each month beginning in February. It looks like a great year, and it begins that way. January 1: Cash, $1,000; inventory, $500; receivables, $750. In January, the firm sells on account for $750, 500 toy guns costing $500. The firm collects all receivables outstanding at the beginning of the month. Production equals 500, at a total cost of $500. Net income for the month is $250. The books at the end of January show: January 31: Cash, $1,250; inventory, $500; receivables, $750. a. Prepare the following January report for the Roxy Company: IS 1,000 500 750 Sales COGS Cash BB Collections Payments | Iny BB Production Shipments EB AR BB Sales Collections EB NI b. Do you anticipate any future problems for the Roxy Company? What do you need to do in order to verify your conjecture? February This month's sales jump, as predicted, to 1,000 units, with a corresponding step-up in production, to maintain the 30-day inventory. All receivables from January sales are collected. e. Prepare the following February report for the Roxy company: Recall the balances at the end of January were Cash, $1,250; inventory, $500; receivables, $750. IS Cash Iny BB BB AR BB Sales Collections Sales COGS Collections Payments Production Shipments EB NI EB March: March sales are even better--1,500 units. The manager of the Roxy Company shakes the sales manager's hand. Customers are paying right on time. Production is pushed up. The manager of the Roxy Company takes off for Milan before the accountant's report is issued. Suddenly a phone call comes from the treasurer: "Come home! We need money!" d. Prepare the following March report for the Roxy Company: IS AR Sales Cash BB Collections Payments EB BB Production Shipments Sales Collections COGS NI EB Discussion e. Prepare an analysis that explains what happened to Roxy Company. f. How can a firm show increasing net income but a decreasing amount of cash