Table A: Condensed Income Statements, 1991-1993 (thousands of dollars)

1991

1992

1993

Net sales $5,213 Cost of goods sold 3597 Gross profit $1,616 Operating expenses 1199 Interest expense 68 Interest income 20 Profit before taxes $369 Federal income taxes 125 Net profit $244

$6,167 4440 $1,727 1542 75 15 $125 43 $82

$7,967 5577 $2,390 1912 85 16 $409 139 $270

Table B: Balance Sheet at December 31, 1993 (thousands of dollars)

Cash Accounts receivable Inventory Current assets Plant and equipment, net Total assets Accounts payable Notes payable, bank Accrued taxes(a) Long-term debt, current portion Current liabilities Long-term debt Shareholders' equity Total liabilities and shareholders' equity

$200 2905 586 $3,691 1176 $4,867 $282 752 88 50 $1,172 400 3295 $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.

ril, June, September, vious year's tax. The

Table C: Monthly Sales Data (thousands of dollars)

Sales 1993 Actual 1994 Projected

Total $7,967 $10,000

Jan $64 $120

Feb 88 140

Mar 96 160

Apr 88 140

May 87 140

Jun 95 140

Jul 96 160

Aug 1251 1620

Sep 1474 1840

Oct 1723 2140

Nov 1965 2285

Dec 940 1115

Exhibit 1

Pro Forma Balance Sheets Under Seasonal Production, 1994 (thousands of dollars)

Note

Actual Dec. 31, 1993

Jan.

Feb.

Mar.

Apr.

Cash Accounts receivable Inventory Current assets Net plant and equipment Total assets

(a) (b) (c)

$200 2905 586 $3,691

$878 1060 586 $2,524 1176 $3,700 $36 31 50 $117 400 3183

$1,526 260 586 $2,372 1176 $3,548 $42 -23 50 $69 400 3079

$1,253 300 586 $2,139 1176 $3,315 $48 -162 50 ($64 400 2979

$1,054 300 586 $1,940 1176