Artero Corporation, discussed in Problem 9, is a retailer of toy products. The firm's management team recently extended the monthly sales forecasts that were prepared for the last three months of 2011 for an additional six months in 2012. These forecasts were presented to Swen Artero, the firm's president, as follows:
MONTH SALES FORECASTS ($)
October 2011 .. 1,000,000
November .... 1,500,000
December .... 3,000,000
January 2012 .. 1,500,000
February ..... 1,000,000
March ...... 700,000
April ...... 700,000
May ........ 700,000
June ....... 700,000
A. Use the income statement data and the balance sheet information from Problem 9 to prepare monthly income statements, balance sheets, and statements of cash flows for October through December 2011. What is the maximum amount of bank borrowing that would be needed?
B. Prepare monthly income statements, balance sheets, and statements of cash flows for the first six months of 2012. Assume the information and data relationships from Problem 9 will continue to hold for the first six months of 2012. Indicate if, and when, the additional bank borrowing needed during the last three months of 2011 can be repaid.
C. Based on your financial statement projections for the first six months of 2012, indicate whether new bank borrowing will be needed.