Table A Consolidated Income Statement, 2009-2011 (in thousands of dollars)

2009
2010
2011
Net sales
14,079
15,065
16,360
COGS
9,011
10,244
10,798
Gross profit
5,068
4,821
5,562
Operating expense
3,520
3,615
4,090
Interest expense
105
125
128
Interest income
17
19
15
Pretax profit
1,461
1,099
1,359
Income tax
497
374
462
Net income
964
725
897

Table B Balance Sheet at December 31, 2011 (in thousands of dollars)

Cash
500
Accounts receivable
5,245
Inventory
1,227
Current assets
6,972
PP&E
2,988
Total assets
9,960
Accounts payable
Notes payable, bank
Accrued taxes
Long-term debt, current portion
Current liabilities
Long-term debt
Total liabilities
Shareholders equity
Total liabilities and shareholders equity

966
826
139
100
2,031
1,000
3,031
6,929
9,960

Table C Monthly Sales (in thousands of dollars)

Sales
Projected Sales
2011
2012
January
671
702
February
393
486
March
360
414
April
311
378
May
180
162
June
196
180
July
474
378
August
769
540
September
2,896
2,970
October
2,618
2,520
November
4,564
5,724
December
2,928
3,546
Total
16,360
18,000

Exhibit 1 2012 Pro Forma Balance Sheets and Accured Taxes Under Seasonal Production (in thousands of dollars)
Actual
Dec 31,
2011
Jan
Feb
Mar
Apr
May
Jun
Casha
500
1,511
2,950
2,768
2,477
2,274
1,946
Accounts receivableb
5,245
2,541
832
630
554
378
239
Inventoryc
1,227
1,227
1,227
1,227
1,227
1,227
1,227
Current assets
6,972
5,280
5,009
4,625
4,259
3,879
3,413
Net PP&Ed
2,988
2,988
2,988
2,988
2,988
2,988
2,988
Total assets
9,960
8,268
7,997
7,613
7,247
6,867
6,401
Accounts payablee
Notes payable, bank
Accrued taxesf
Long-term debt, current portion
Current Liabilities
g
Long-term debt
Total liabilities
Shareholders' equity
Total liabilities and equity
Accrued Taxes
Beg. accrued taxes
Accrual of monthly taxes
Tax payments
End. accrued taxes

Jul
1,625
391
1,227
3,243
2,988
6,231

966
826
139
100
2,031
1,000
3,031
6,929
9,960

232
0
94
100
425
1,000
1,425
6,842
8,268

160
0
26
100
286
1,000
1,286
6,710
7,997

137
0
-188
100
49
1,000
1,049
6,564
7,613

125
0
-388
100
-163
1,000
837
6,409
7,247

53
0
-492
100
-339
1,000
661
6,206
6,867

59
0
-715
100
-556
950
394
6,007
6,401

125
0
-795
100
-571
950
379
5,851
6,231

139

139
-45
0
94

94
-68
0
26

26
-75
-139
-188

-188
-80
-120
-388

-388
-105
0
-492

-492
-103
-120
-715

-715
-80
0
-795

Assumed maintenance of minimum $500,000 balance.

Assumed 60-day collection period for wholesale sales and instant collection for retail sales.
c
Assumed inventories maintained at December 31, 2011 level for all of 2012.
d
Assumed equipment purchases equal to depreciation.
e
Assumed equal to 50% of the current month's COGS for seasonal production; and was related to material purchases that accounts for 50% of COGS for 20
Since inventories are level, purchases will follow seasonal production and sales pattern.
b

Taxes payble on 2011 income are due March 15, 2012. On April 15, June 15, September 15, and December 15, 2012, payments of 25% of each of the estim
liability for 2012, the company uses a tax liability of $480,000. This implies a payment of $120,000 in April, June, September and December.
g

To be repaid at the at rate of $50,000 each June and December

Aug
1,246
643
1,227
3,116
2,988
6,104

Sep

Oct

Nov

Dec

758
2,457
1,227
4,442
2,988
7,430

500
3,843
1,227
5,570
2,988
8,558

500
5,771
1,227
7,498
2,988
10,486

500
6,489
1,227
8,216
2,988
11,204

178
0
-857
100
-578
950
372
5,732
6,104

980
0
-757
100
323
950
1,273
6,158
7,430

832
785
-590
100
1,126
950
2,076
6,482
8,558

1,889
80
-55
100
2,014
950
2,964
7,522
10,486

1,170
847
111
100
2,228
900
3,128
8,076
11,204

-795
-61
0
-857

-857
219
-120
-757

-757
167
0
-590

-590
536
0
-55

-55
285
-120
111

accounts for 50% of COGS for 2012. This represents a 30-day payment period.

yments of 25% of each of the estimated tax for 2012 are due. In estimating its tax
ber and December.

Exhibit 2 2012 Pro Forma Income Statement Under Seasonal Production (in thousands of dollars)
Jan
Feb
Mar
Apr
May
Jun
Net sales
702
486
414
378
162
180
COGSa
463
321
273
249
107
119
Gross profit
239
165
141
129
55
61
Operating expensesb
Interest expense
Interest incomec
Profit (loss) before tax
Income taxesd
Net income
a

360
11
1
-132
-45
-87

360
7
3
-200
-68
-132

360
7
5
-222
-75
-146

360
7
5
-234
-80
-155

360
7
4
-308
-105
-203

360
7
4
-302
-103
-200

Jul

Aug
378
249
129

540
356
184

360
7
3
-235
-80
-155

360
7
3
-181
-61
-119

Assumed cost of goods sold equal to 66% sales.

Assumed to be same for each month throughout the year.
c
2% annualized rate of return on monthly cash balances.
d
Negative figures are tax credits from operating losses, and reduced accured taxes shown on balance sheets. The federal tax rate on all earnings was 34%.
b

Sep
2,970
1,960
1,010

Oct
2,520
1,663
857

Nov
5,724
3,778
1,946

Dec
3,546
2,340
1,206

Total
18,000
11,880
6,120

360
7
2
645
219
426

360
7
1
491
167
324

360
11
1
1,576
536
1,040

360
7
1
839
285
554

4,320
94
32
1,737
591
1,147

rate on all earnings was 34%.

Exhibit 3 2012 Pro Forma Cash Flow Statement Under Seasonal Production (in thousands of dollars)
Jan
Feb
Mar
Apr
May
Operating Activities
Net income
-87
-132
-146
-155
-203
Depreciation
25
25
25
25
25
Less: Increase (Decrease) in A/R
-2,704
-1,710
-202
-76
-176
Less: Increase (Decrease) in Inventory
0
0
0
0
0
Add: Increase (Decrease) in A/P
-735
-71
-24
-12
-71
Add: Increase (Decrease) in Accrued Taxes
-45
-68
-214
-200
-105
Cash flow from operations
1,862
1,464
-157
-265
-178
Investing Activities
Less: capital expenditures
Cash flow from operating and investing
Cash available before financing activities
Financing Activities
Less: bank note repayment
Less: debt repayment
Add: bank note issuance
Cash flow from financing
Total Cash Flow

Jun

Jul

-200
25
-139
0
6
-223
-253

-155
25
151
0
65
-80
-296

-25
1,837
1,837

-25
1,439
2,450

-25
-182
2,268

-25
-290
1,977

-25
-203
1,774

-25
-278
1,496

-25
-321
1,125

826
0
0
-826

0
0
0
0

0
0
0
0

0
0
0
0

0
0
0
0

0
50
0
-50

0
0
0
0

1,011

1,439

-182

-290

-203

-328

-321

Aug

Sep

Oct

Nov

Dec

-119
25
252
0
53
-61
-354

426
25
1,814
0
802
99
-463

324
25
1,386
0
-149
167
-1,018

1,040
25
1,928
0
1,057
536
731

554
25
718
0
-719
165
-693

-25
-379
746

-25
-488
258

-25
-1,043
-785

-25
706
706

-25
-718
-718

0
0
0
0

0
0
0
0

0
0
785
785

706
0
0
-706

0
50
768
718

-379

-488

-258