QUESTION: Create a projected income statement for the quarter ending September 30

The accounting department at JC established the financial statements for the second fiscal

quarter of 2021 (April, May, June) that just ended, and presented the balance sheet to JCs

executives, together with forecasted data for the third quarter of 2021 (July, August, September).

The companys balance sheet at the end of the second quarter of 2021 is shown below:

Jackson Company

Balance Sheet at June 30, 2021

Assets

Cash $70,000

Accounts Receivable 125,900

Inventory 52,000

Fixed Assets (Net) 200,000

Total Assets $447,900

Liabilities and Shareholders Equity

Accounts Payable $61,100

Common Shares 300,000

Retained Earnings 86,800

Total Liabilities and Shareholders Equity $447,900

The accounting team at JC provides you with the following additional data:

1.

Estimated sales for the months of July 2021 through October 2021 respectively are:

$200,000, $220,000, $210,000, and $230,000.

2.

Historical data indicates that 10% of sales each month are cash sales while the rest are

credit sales. The company does not offer any cash discount for early payment. The

collection pattern for credit sales is 30% are collected in the month of sale and 70% are

collected in the month following the month of the sale. The company does not have any

uncollectible sales.

3.

Cost of goods sold (or cost of goods to be sold) is 75% of sales.

4.

The inventory policy is based on the dollar amount of cost of goods (to be) sold instead of

being based on a number of units sold. Each months desired ending inventory must be

equal to 30% of the next months dollar amount of cost of goods (to be) sold.

5.

The company pays for 50% of its merchandise purchases in the month of the purchase and

the remaining 50% in the month following the month of purchase.

6.

Monthly general and administrative expenses are $65,000 which includes $7,000 in

depreciation expense. All general and administrative expenses are paid in the month that

they are incurred.

7.

The company plans to pay $3,000 in dividends in September, 2021 and to purchase capital

assets costing $90,000 in July, 2021. Payment for the capital assets will be evenly

disbursed over the 2 months immediately following the month of purchase.

8.

Covenants contained in the lending agreement with their bank requires JC to maintain a

minimum monthly ending cash balance of $50,000. Currently, JC has access to a

revolving line-of-credit from another lender for $150,000 (none of which has been used as

of June 30, 2021, as shown in the balance sheet at this date). The monthly line of credit

interest rate is 2.5%. Any required borrowing is assumed to occur at the start of the month

in which said borrowing is needed. Principal repayments on the line of credit are made at

the end of the month with any cash funds that JC has that exceed the minimum required

balance that month. Interest is charged to JC by the lender based on the principal amount

owing (cumulated amount borrowed) at the end of the month. The interest on the principal

amount owing on the line of credit at the end of a month is accrued in JCs books at the

end of that month and is paid by JC the following month

QUESTION: Create a projected income statement for the quarter ending September 30