Artero Corporation, discussed in Problems 9 and 11, is a retailer of toy products. This is a continuation of Problem 11. The firm’s management team recently extended the monthly sales forecasts through the last six months of 2012. Artero expects to spend $100,000 on fixed assets in July 2012, and depreciation charges will increase to $12,000 per month beginning in August 2012.
MONTH
|
SALES FORECASTS ($
|
July
|
900,000
|
August
|
1,100,000
|
September
|
1,400,000
|
October
|
1,700,000
|
November
|
2,800,000
|
December
|
4,000,000
|
A. Prepare monthly income statements, balance sheets, and statements of cash flows for the last six months of 2012.
B. Based on your financial statement projections for the last six months of 2012, indicate (1) whether new bank borrowing will be needed to finance the seasonal sales pattern and (2) if a loan is needed, when does the need start occurring and what is the maximum amount needed?
C. Assume that sales are forecasted for the first three months of 2013 as follows: January = $3 million, February = $2 million, and March = $1 million. Will Artero be able to pay off any bank borrowing that is needed in 2012? Based on your analyses, what type(s), if any, of bank loan(s) will be needed in 2012?