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Toy World Inc Case Solution 7 PDF Free
Toy World Inc Case Solution 7 PDF Free
Page 1
Table B
Cash $200
Accounts receivable 2,905
Inventory 586
Current assets $3,691
Plant and equipment, net 1,176
Total assets $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.
Page 2
Table B
, June, September,
ous year's tax. The
Page 3
Table C
Page 4
Table C
Page 5
Table C
Nov Dec
1,965 940
2,285 1,115
Page 6
Exhibit 1
Exhibit 1 Pro Forma Balance Sheets Under Seasonal Production, 1994 (thousands of dol
Actual
Dec. 31,
Note 1993 Jan. Feb. Mar.
Total liabilities
and equity $4,867 $3,700 $3,548 $3,315
Notes:
(a)Assumed maintenance of minimum $200,000 balance; includes excess cash in months when company is
(c)Assumed inventories maintained at December 31, 1993 level for all of 1994.
(e)Assumed equal to 30% of the current month's sales and related to material purchases of $3,000,000 for 1
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 Dec
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, Septem
Page 7
Exhibit 1
Page 8
Exhibit 1
Page 9
Exhibit 2
Exhibit 2 Pro Forma Income Statement Under Seasonal Production, 1994 (thousands of dollars)
(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 shee
Page 10
Exhibit 2
94 (thousands of dollars)
ued taxes shown on balance sheet. The federal tax rate on all earnings was 34%.
Page 11
Exhibit 2
Page 12
Toy World, Inc.
Net Savings from Level Production
Notes:
Accounts receivable - Sales of the last two months
Net plant and equipment - Equal to depreciation expense
Accounts payable - 30% of sales ($3,000,000/12) = $250,000 p
Notes payable - Balancing figure
Long-term debt (current portion) - $50
Long-term debt - $400 as of December 1993, with $25 being pa
Shareholders' equity - Beginning equity + net income (loss) per
Apr. May June July Aug. Sept.
ember 1993, with $25 being paid off every June and December
equity + net income (loss) per month
Oct. Nov. Dec.
Notes:
Net sales - Estimated 1994 net sales per month
COGS - 65.1% of net sales per month
Operating expenses - $200*12 = $2,400 annually under seasonal producti
Interest expense -
Interest income -
Income taxes - 34% of profit (loss) before taxes
May June July Aug. Sept. Oct.
lly under seasonal production+ $ 115 additional storage/handling costs = $2,515 annually ($209.58 monthly)
Nov. Dec. Total
Jan.
Inflows
Collections $1,965.00
After-tax interest income $0.44
Total $1,965.44
Outflows
Payments of accounts payable $282.00
Tax payments $0.00
Repayment of long-term debt $0.00
Operating expenses $209.58
Interest expense $9.25
Wages $292.50
Total $793.33
Net inflow (outflow) $1,172.11
Beginning cash $200.00
Ending cash before any loan increase or repayment $1,372.11
Loan availment $0.00
Loan repayment $752.00
End-of-month cash balance $620.11
Long-term debt
Balance, beg. $450.00
Repayment $0.00
Balance, end $450.00
Interest Expense
on long-term debt 9.625% $3.61
on notes payable 9.000% $5.64
$9.25
200
Notes:
Finished goods (completed) - COGS/12
Taxes paid - $88 (previous year's balance) on March, $35 on April,
Apr. May June July Aug. Sept.
Jan
Net Sales 120 Cash 623.9467
COGS 65.10% 78.12 A/R 1060
Operating expense 209.5833 Inventory 1050.38
Int Expenses: Total CA 2734.327
LT Debt 450 3.609375 Net PE 1176
Notes payable 752 5.64 Total Assets 3910.327
Add: Interest income 200 0.666667 Accr Int. 3.609375
PBT -176.286 Acc. Pay. 250
Tax 34% -59.93725 Notes Payable 0
PAT -116.349 Accrued tax 28.1
LT Loan curr. 50
Total CL 331.7094
LT Loan Non Cur 400
Net worth 3178.651
Total Liabilitie 3910.361
pital with inventory. Interest paid on average balance
Jan
Inflows:
A/R 1965
Interest credit 0.67
Total Cash inflows 1965.67
Outflows:
A/P Paid: 282
Other manuf cost 292.5
Opex 209.5833
Interest paid: