PS# 3 Financial Planning

AFM: Chapter 3 # 10 & 11

FM: Chapter 12 # 5, 7 & 9 (same in 14th edition)

Polar Sports, Inc Co: turn to the Polar Sport case. No write up for this second case but you should prepare pro-forma I/S and B/S under level production in XL format:

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) Cash500 Accounts receivable5,245 Inventory1,227 Current assets6,972 PP&E2,988 Total assets9,960 Accounts payable966 Notes payable, bank826 Accrued taxes139 Long-term debt, current portion100 Current liabilities2,031 Long-term debt1,000 Total liabilities3,031 Shareholders equity6,929 Total liabilities and shareholders equity9,960

Table CMonthly 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, 2011JanFebMarAprMayJunJulAugSepOctNovDec Casha5001,5112,9502,7682,4772,2741,9461,6251,246758500500500 Accounts receivableb5,2452,5418326305543782393916432,4573,8435,7716,489 Inventoryc1,2271,2271,2271,2271,2271,2271,2271,2271,2271,2271,2271,2271,227 Current assets6,9725,2805,0094,6254,2593,8793,4133,2433,1164,4425,5707,4988,216 Net PP&Ed2,9882,9882,9882,9882,9882,9882,9882,9882,9882,9882,9882,9882,988 Total assets9,9608,2687,9977,6137,2476,8676,4016,2316,1047,4308,55810,48611,204 Accounts payablee96623216013712553591251789808321,8891,170 Notes payable, bank82600000000078580847 Accrued taxesf1399426-188-388-492-715-795-857-757-590-55111 Long-term debt, current portion100100100100100100100100100100100100100 Current Liabilities2,03142528649-163-339-556-571-5783231,1262,0142,228 Long-term debtg1,0001,0001,0001,0001,0001,000950950950950950950900 Total liabilities3,0311,4251,2861,0498376613943793721,2732,0762,9643,128 Shareholders' equity6,9296,8426,7106,5646,4096,2066,0075,8515,7326,1586,4827,5228,076 Total liabilities and equity9,9608,2687,9977,6137,2476,8676,4016,2316,1047,4308,55810,48611,204 Accrued Taxes Beg. accrued taxes1399426-188-388-492-715-795-857-757-590-55 Accrual of monthly taxes-45-68-75-80-105-103-80-61219167536285 Tax payments00-139-1200-12000-12000-120 End. accrued taxes1399426-188-388-492-715-795-857-757-590-55111 a Assumed maintenance of minimum $500,000 balance. b 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 2012. This represents a 30-day payment period. Since inventories are level, purchases will follow seasonal production and sales pattern. f 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 estimated tax for 2012 are due. In estimating its tax 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