XYZ Inc. Balance Sheet as at December 31, 2022 (in '000s) ACTUAL Ssales for 2022 (in '000s): November $820 December $930 PROJECTED [estimated/forecasted/budgeted] Sales for 2023 (in '000s): REQUIRED: Prepare Pro-Forma financial statements for the first quarter of 2023 L ] an - March ]. "HIGHLY SEASONAL": January to July Sales =420=9.77% of yearly sales August to December Sales =3880=90.23% of yearly sales Total Sales $4.300 Question You have been provided with the 2022 financial statements of XYZ Inc. (XYZ) (reproduced below) and the following additional information [all amounts are in '000s]: throughout the year because of its limited plant capacity and its annual inventory levels are constant. [Thus, Begining Inventory = Ending Inventory.] - Cost of goods sold (COGS) is 70% of sales. Estimated costs of goods manufactured (COGM) for 2023 is 3,010 . Due to level production, the value of goods produced each month is the same. [COGM (Depends on Sales-i.e., More/Less Sales More/Less COGM) =70% of sales = 3,010; since inventory levels are constant, BFGI + COGM - EFGI = COGS, and COGM = COGS] - Accounts payable, for the purchases of raw materials (RM), are paid in the month following purchase and due to level production, are constant at $125 at the end of each month. Thus, purchases each month =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 cash over the minimum required will be used to reduce the line of credit, where applicable. (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 Company PRO FORMA Quarterly Income Statements \begin{tabular}{|l|l|l|} \hline & \multicolumn{1}{|c|}{ Q1 } & \multicolumn{1}{|c|}{ Quarter 2 } \\ \hline Sales & $165,000 & \\ \hline Cost of goods sold & 115,500 & \\ \hline Gross profit & 49,500 & \\ \hline Operating expenses & 138,000 & \\ \hline Depreciation expense & 131,250 & \\ \hline Income before interest \& taxes & (219,750) & \\ \hline Interest expense & 25,000 & \\ \hline Income before taxes & (244,750) & \\ \hline Income tax (expense)/recovery & 122,375 & \\ \hline Net Income & $(122,375) & \\ \hline \end{tabular} PRO FORMA Quarterly Balance Sheets \begin{tabular}{|l|l|l|} \hline & \multicolumn{1}{|c|}{ Q1 } & \multicolumn{1}{|c|}{ Quarter 2 } \\ \hline Cash & $815,500 & \\ \hline Accounts receivable & 110,000 & \\ \hline Inventory & 947,000 & \\ \hline Plant \& equipment & 10,500,000 & \\ \hline Accumulated depreciation & (4,031,250) & \\ \hline Total Assets & $8,341,250 & \\ \hline Accounts payable & $125,000 & \\ \hline Line of credit & 0 & \\ \hline Interest payable & 25,000 & \\ \hline Taxes payable & (122,375) & \\ \hline Current portion of LT debt & 200,000 & \\ \hline Long-term debt & 3,400,000 & \\ \hline Common shares & 1,800,000 & \\ \hline Retained earnings & 2,913,625 & \\ \hline Total Liabilities \& Sh. Equity & $8,341,250 & \\ \hline \end{tabular} XYZ Inc. Pro-Forma Balance Sheet ("B/S") March 31, 2023 \begin{tabular}{|c|c|c|} \hline Cash["LASTitem"]=1030.5215K & 7,030,500815,500 & Cash[$1,030,500]isVERYHIGHbecauseoftheCollectionofAR[$1,750Kon31/12/2022]. \\ \hline AccountsReceivable=55+55 & 110000 & TheBalanceofARat31/12/2022consistsofCreditSalesforthemonthsofNov.2022swouldbecollectedby3//1/23Dec.2022swouldbecollectedby31/3/2328/2/23Jan.2023swouldbecollectedbyTheBalanceofARat31/3/202331/3consistsofCreditSalesforthemonthsofFebandMarch \\ \hline Inventory=310+752.5115.5 & 947.000 & \\ \hline PP\&E & 10500000 & From the 31/12/2022 Balance Sheet (B/S). \\ \hline AccumulatedDepreciation & 4000(4031250) & $3900[B/S]+$131.25[L/s] \\ \hline Net Book Value (NBV) & 6,468,750 & NBV of $6,600,000 [from B/S ] $131,250 [from I/S] \\ \hline TotalAssets=L+SE & 8,556,2508,341,250 & AssumingLOC=215,0008,556,250215,000 \\ \hline Accounts Payable & 125000 & "constant at..." \\ \hline LineofCreditWithLOC=215,000:Assets=8,556,250Cash=1,030,500[>Minimumof$150,000]Thus,OCDayofttheLOC & 215,0000 & Step1:MUSTFOLLOWSTEPSandSHOWWORK.AssumetheamountisthesameasthemostrecentBalanceSheet[inthiscase,$215,000at31/12/2022].Step2:SolveforCash[$1,030,500]tomakeA=L+SEStep3:-IFCash[Step2]>MinimumRequired,PayOffLineofCredit,ifany.MAXIMUMcanPayOff=Cash[Step2]-MinimumRequired.-IFCash[Step2]Minimumof$150,000]Thus,OCDayofttheLOC & 215,0000 & Step1:MUSTFOLLOWSTEPSandSHOWWORK.AssumetheamountisthesameasthemostrecentBalanceSheet[inthiscase,$215,000at31/12/2022].Step2:SolveforCash[$1,030,500]tomakeA=L+SEStep3:-IFCash[Step2]>MinimumRequired,PayOffLineofCredit,ifany.MAXIMUMcanPayOff=Cash[Step2]-MinimumRequired.-IFCash[Step2]