Ponzi Products produced 90 chain letter kits this quarter, resulting in a total cash outlay of...

Ponzi Products produced 90 chain letter kits this quarter, resulting in a total cash outlay of $10 per unit. It will sell 45 of the kits next quarter at a price of $11, and the other 45 kits in two quarters (in Quarter 3) at a price of $12. It takes a full quarter for it to collect its bills from its customers. (Ignore possible sales in earlier or later quarters and assume all positive cash flow is distributed as expenses or earnings to shareholders.)

a.	Prepare an income statement for Ponzi for today and for each of the next three quarters. Ignore taxes. (Leave no cells blank - be certain to enter "0" wherever required.)

	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Sales	$	$	$	$
Cost of goods sold

Net income	$	$	$	$

b.	What are the cash flows for the company today and in each of the next three quarters? (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign.)

	Cash Flow
Quarter 1	$
Quarter 2
Quarter 3
Quarter 4

c.	What is Ponzi’s net working capital in each quarter? (Leave no cells blank - be certain to enter "0" wherever required.)

	Net Working Capital
Quarter 1	$
Quarter 2
Quarter 3
Quarter 4

Expert Solution

a.

	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Sales	$ 0	$ 495[45units*$11]	$ 540[45units*12$]	$ 0
Cost of goods sold	0	450[45units*$10]	450[45*10]	0

Net income	$ 0	$ 45[495-450]	$90	$ 0

b.

What are the cash flows for the company today and in each of the next three quarters? (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign.)

As the receivable are collected in next quarter. the cash inflow from sale in quarter 2 would be received in quarter 3. and quarter 3 sales will be received in cash in quarter 4.

	Cash Flow
Quarter 1	$ -900(90*$10)
Quarter 2	0
Quarter 3	495
Quarter 4	540

c.

What is Ponzi’s net working capital in each quarter? (Leave no cells blank - be certain to enter "0" wherever required.)

	Net Working Capital
Quarter 1	$ 900
Quarter 2	945
Quarter 3	540
Quarter 4	0

net working capital = current asset - current liability

there are no liabilities here as all the cash cost are paid in quarter 1.

current assets = account receivable + inventory

	QUARTER 1	2	3	4
INVENTORY	900$[90*10$]	450$[90-45]*10	0$	0$
ACCOUNT RECEIVABLES	0	$495	$540	0$

Total	900	945[450+495]	540	0

ekkarill92 answered 1 year ago

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