Ponzi Products produced 114 chain letter kits this quarter, resulting in a total
ID: 2695299 • Letter: P
Question
Ponzi Products produced 114 chain letter kits this quarter, resulting in a total cash outlay of $11 per unit. It will sell 57 of the kits next quarter at a price of $12, and the other 57 kits in two quarters at a price of $13. It takes a full quarter for it to collect its bills from its customers. (Ignore possible sales in earlier or later quarters. 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 PonziExplanation / Answer
a. An income statement for Ponzi for today and for each of the next three quarters.
Quarter 1
Sale =$0
Cost of Good Sold = $0
Net Income= $0
Quarter 2
Sale =57kit@$12 = $684
Cost of Good Sold = 57kit@$11 = $627
Net Income= $57
Assuming out of 57KIT in Qtr3 & Qtr4 The Kit sold in 3rd qtr be 29 Kit Hence The Kit sold in 4th qtr = 28
Quarter 3
Sale =29kit@$13 = $377
Cost of Good Sold = 29kit@$11 = $319
Net Income= $58
Quarter 4
Sale =28kit@$13 = $364
Cost of Good Sold = 28kit@$11 = $308
Net Income= $56
b. the cash flows for the company
In Quarter 1 Cash flow = -$1254
In Quarter 2 Cash flow = $0
In Quarter 3 Cash flow = $684
In Quarter 4 Cash flow = $377
In next Qtr after Qtr4 Cash flow = $364
c. Ponzi