Question

Company X, a manufacturing company, has been growing quickly but has found that its financial situation is continually under pressure. Production has fluctuated to meet demand in an attempt to provide first-class service resulting in larger inventory positions. Also, the collection of accounts has worsened to approximately 60 days which is well above the terms of 30 days. To address the finanical concerns, Toys for You has proposed level production and an effort by the credit department to bring the average collection period down to 35 days Estimated sales for the upcoming months are July $1,957,500 October 2,362,500 August2,070,000 November 2,475,000 September 2205,000 Decembel 2 565,000 Sales for May were $1,732,500 and will be approximately $1,845,000 for the current month of June It is projected that the current collection period of 60 days will be reduces to 50 days for July and August, 42 days for September and October, and will meet the target of 35 days in November and December Purchases are forecast to be $585,000 a month beginning in July In May they were $675,000 and in June they are expected to be $607,500. The purchases are paid in 40 days. Materials used per month beginning in July will be $744,000. Labour expense will be paid when incurred and are expected to be $195,000 a month. Other expenses of manufacturing will also be paid as incurred and are expected to be $375,000 a month. Cost of goods sold has regularly been 70 percent of sales Amortization is $38,000 per month. Selling and administrative expenses are expected to be 13 percent of sales The tax rate is 42 percent There will be payments on notes of $675,000 in each of August and November. Interest of $270,000 and income taxes of $338,000 are both due in October. Dividends of $22,500 are payable in July and October

Answer 1

Answer for first part is

Income statement								Amount in USD
Particulars	July	Aug	Sep	Quarter Ended Sep	Oct	Nov	Dec	Quarter Ended Dec
	2018	2018	2018	2018	2018	2018	2018	Dec 18
Sales	1,957,500	2,070,000	2,205,000	6,232,500	2,362,500	2,475,000	2,565,000	7,402,500
Less:
Material used	744,000	744,000	744,000	2,232,000	744,000	744,000	744,000	2,232,000
Labour expense	195,000	195,000	195,000	585,000	195,000	195,000	195,000	585,000
Other expense	375,000	375,000	375,000	1,125,000	375,000	375,000	375,000	1,125,000
Balancing figure (others)	56,250	135,000	229,500	420,750	339,750	418,500	481,500	1,239,750	to maintain COGS 70% of sales
Cost of goods sold (cost of goods sold)	1370250	1449000	1543500	4362750	1653750	1732500	1795500	5181750
	70%	70%	70%	70%	70%	70%	70%	70%
Gross Profit	587,250	621,000	661,500	1,869,750	708,750	742,500	769,500	2,220,750
Selling and adminstrative exp	254,475	269,100	286,650	810,225	307,125	321,750	333,450	962,325
Amortisation	38,000	38,000	38,000	114,000	38,000	38,000	38,000	114,000
Interest expense ( 270000/12)	22,500	22,500	22,500	67,500	22,500	22,500	22,500	67,500
Profit before tax	272,275	291,400	314,350	878,025	341,125	360,250	375,550	1,076,925
Tax @ 42%	114,356	122,388	132,027	368,771	143,273	151,305	157,731	452,309
Net Profit	157,920	169,012	182,323	509,255	197,853	208,945	217,819	624,617
Dividend	22,500				22,500
Profit t/f to retained earnings	135,420	169,012	182,323	509,255	175,353	208,945	217,819	624,617