Question

ABC Company - Biographical Information ABC Company is a family owned business which Jonathan started 15 years ago, issuing 900 shares of the 1000 authorized, at a par value of $100 a share. ABC Company is a small manufacturer which produces ladies’ sports apparel. The business has employed as many as 30 people; however, sales have slipped the last three years, according to Jonathan, due to competition in the marketplace, and the economy. Currently, the business employs nine people, including Jonathan and his son, Junior, who is the Plant Manager. The business appears to be on pace to produce about the same as last year, $800,000, which is down from their high of about $2,500,000 just four years ago. Jonathan’s family is personally in financial trouble, because Jonathan and Junior aren’t taking home the same salary they used to. Three years ago, each of them earned $200K per year. At the time of our arrival, Jonathan hadn’t taken any pay for a month, and Junior is being paid at the rate of $50K per year. Jonathan has a few health issues, and wants Junior to take over the business, but can’t afford to hire a new Plant Manager. Morale throughout the company is low, and productivity is suffering. ABC Company sold 12,307 units last year. 85% of the sales were in workout leggings. Remaining sales were from one order of sweatshirts by their oldest customer. They are behind in payables and past due receivables are at an all time high. Their customer base consists mainly of three local retailers who love working with Jonathan and Junior and have been customers for years. Vendors are getting tired of being paid late, and their primary fabric vendor has just recently put them on COD. There is a loan on the books from Junior’s mother-in-law for $30,000, with a pay plan of $750 a month, but the Company has missed the last three payments and Junior and his wife are becoming increasingly upset about the embarrassment and problems this is causing in their family life.

See attached picture for TWO part question: Creating a Income Statement and doing a Six Week Cash Flow Projection

Exercise One - Tab One (portrait page format) Build a standard, Simple Income Statement (P&L). It must show Revenue, Cost of Goods/Direct Costs, and Overhead expenses, along with the standard totals in each section. Include dollar amounts and percentages for each line item. Be careful to choose only P&L appropriate items from the list of "The Numbers" the Client provided. The Numbers Accounting Fees 6,000 Accounts Payable 94.300 Accounts Receivable 92.600 Accum Deor - Building 20.000 Accum Deor - Equipment 16.000 Accum Depr - Vehicles 8.000 Advertising 7500 Additional Paid in Capital 25.000 Bank Fees 4.450 Building 70.000 Capital Stock 90,000 Cash 36.400 Discounts & Allowances - 21,500 Discounts - Materials -8.520 Dues & Subscriptions 620 Equipment 30.000 Equipment Maintenance 18.690 Franchise 6.500 Freight Out Expense 5.200 Goodwill 10.000 Income Tax 800 Interest Expense 4.000 Investment in JKL Corporation 9.000 Land 9.250 Marketable Securities 8.000 Material Purchases 292500 Merchandise Inventory 119.000 Motor Vehicles 20.000 Note Payable (due in 6 months) 7.000 Note Payable (due in 2.5 years) 30,000 Notes Receivable 5,000 Office Supplies 6,000 Payroll - Administrative 44.000 Payroll - Direct Labor 202.210 Payroll - Management 50.000 Payroll - Overtime 13,600 Payroll taxes 15.000 Prepaid Expenses 3,000 Rent 30.000 Repairs & Maintenance 21,250 Retained Earnings 119.750 Revenue 821,500 Revenue Received in Advance 2.000 Sales Commissions 40.000 Selling Supplies 2.250

Answer 1

	ABC Company
	Statement of Profit and Loss
	Particulars	Amount
	Revenue	$       821,500
Less :	Discount and Allowances	$         21,500
	Material Purchase ( Net of Disc)	$       283,980
	Sales Commissions	$         40,000
	Gross Margin	$       476,020
	Other Income
	- Supplies Sales	$            2,250
	Total	$       478,270
	Operational Expenses
	Advertising Expenses	$            7,500
	Accounting Fees	$            6,000
	Bank Fees	$            4,450
	Freight	$            5,200
	Rent	$         30,000
	Office Supplies	$            6,000
	Dues and subscription	$               620
	Maintainence	$         39,940
	Franchise	$            6,500
	Payroll Expenses
	Payroll - Administrative	$         44,000
	Payroll - Direct Labour	$       202,210
	Payroll - Management	$         50,000
	Payroll - Overtime	$         13,600
	Payroll Taxes	$         15,000
	Earnings before Interest and Tax	$         47,250
	Interest Expense	$            4,000
	Earnings before Tax	$         43,250
	Income Tax	$               800
	Net Operating Income	$         42,450

ABC Company
Cash Flow Projection
Particulars	Week 1	Week 2	Week 3	Week 4	Week 5	Week 6
Opening Balance	$        7,000	$        4,684	$        14,684	$        1,118	$        16,518	$    5,102
Collections from AR :
Over 90 Days	$      24,000	$     18,000	$        12,000	$     20,000
90 Days
60 Days
30 Days					$        29,600	$    6,000
Total	$      31,000	$     22,684	$        26,684	$     21,118	$        46,118	$ 11,102
Payroll Expenses	$      11,916		$        11,916		$        11,916
Payroll Taxes		$        1,250		$        1,250
Truck Lease		$           550				$        550
Payment on Building	$        2,500				$          2,500
Equipment Loan				$        1,350
Accountant Fees	$        1,200
Telephone Expenses			$              650
Utilities Expenses	$            850				$              850
Loan Payback	$            750				$              750
AP Payment
Over 90 Days	$        9,100	$        6,200	$        13,000	$        2,000	$        25,000	$    6,000
Closing Balance	$        4,684	$     14,684	$          1,118	$     16,518	$          5,102	$    4,552

Note : AP standard O/s for 60 Days is considered.

AR standard recievable is considered at 30 days o/s.