We prepared the statements for Quarter 1 (Q1) in class. Prepare thestatements for Q2(April 1 –June30). Show your work on the next page.XYZ Company PRO FORMA Quarterly Income Statements Q1 Q2Sales $165,000Cost of goods sold 115,500Gross profit 49,500Operating expenses 138,000Depreciation expense 131,250Income before interest &taxes (219,750)Interest expense 25,000Income before taxes (244,750)Income tax (expense)/recovery 122,375Net Income $(122,375)PRO FORMA Quarterly Balance Sheets Q1 Q2Cash $815,500Accounts receivable 110,000Inventory 947,000Plant & equipment 10,500,000Accumulated depreciation (4,031,250)Total Assets $8,341,250Accounts payable $125,000Line of credit 0Interest payable 25,000Taxes payable (122,375)Current portion of LT debt 200,000Long-term debt 3,400,000Common shares 1,800,000Retained earnings 2,913,625Total Liabilities & Sh. Equity $8,341,250 Il IIXYZ Inc.'TER 5Balance Sheet as at December 31, 2020(s000, ui)MONEY$1501,750310$2,210ASSETS100 a YAccounts receivable I Q20 + 930.1InventoryCashTotal current assets$10,500Property, plant and equipment (“PP&E")Less: Accumulated depreciationPP&E, net$8.810Total assetsLIABILITIES AND SHAREHOLDERS' EQUITYAccounts payableBank loan (line of credit)Interest payableInceme tax payable [paidMarch 81,202/Current portion of long-term debt$125215200 current tong ten$5743,4007non3,974betTotal current liabilitiescurrent LicketLong-term debt [net of current portion]Total liabilitiesCommon shares [Capital stock]Retained earningsTotal liabilities and shareholders' equity3,036$8.810ACTUAL sales for 2020 (in '000s):November$820December$930PROJECTED (estimated) sales for 2021 (in '000s):%$455$55$55$55JanuaryFebruary QJulyAugustSeptember$80$55006924$830MarchOctoberMayNovember$85009$DecemberJune0962$REQUIRED:Janl-Mar 31Jan |-Prepare Pro-Forma financial statements for the first quarter of 2021 [L"HIGHLY SEASONAL":January to July Sales9.77% of yearly salesAugust to December Sales == 90.23% of yearly salesTotal Sales$4.3004-32 QuestionYou have been provided with the 2020 financial statements of XYZ Inc. (XYZ) (reproduced below)and the following additional information fall amounts are in '000s]:The demand for XYZ's products is highly seasonal, but the firm employs level productionthroughout the year because of its limited plant capacity. YmallCost of goods sold ("COGS") is 70% of sales. Estimated costs of goods manufactured ("COGM)for 2021 is 3,010. Due to level production, the value of goods produced each month is the same.[COGM =_total sales(4300x 703,010 and Monthly production = 3,010 : 12more sale-) more U= $250.833]Accounts payable, for the'purchases of raw materials "RM"A, are paid in the month followingpurchase and owing to level production, are constant at $125 at the end of each month.Thus, purchases each month =125%3DJOURNAL ENTRIES:Acct Paya ble12525• Operating expenses are $46 per month. OSAP• Depreciation expense (on non-manufacturing assets) is calculated on a straight-line basis andequals $525 per year.All sales are on credit and accounts receivable are collected 2 months after the sale. Bad debtsare negligible.• XYZ wants to maintain a MINIMUM cash balance of $150. The company has a $1,000 lineof credit available at the bank that is used for any cash defíciencies (as needed). Any excesscash over the minimum reguired will be used to reduce the line of credit, where applicable.Income taxes are levied at a rate of 50 percent and are paid three)months after the year-end(for the full year).Long-term debt repayments of $100 and interest payments of $50 are made at the end of Junand December. For simplicity, ignore interest on the line of credit.• Annual dividends of $15 are declared and paid at the end of December.XYZ Inc.Income Statement for the Year Ended December 31, 2020$44,149Sales2,904$1,245Cost of goods soldGross marginOperating expensesDepreciation expense552525Income before interest and taxes$168000$68Interest expenseIncome before taxesIncome tax expense34Net income%2434

Question

We prepared the statements for Quarter 1 (Q1) in class. Prepare thestatements for Q2(April 1 –June30). Show your work on the next page.XYZ Company PRO  FORMA Quarterly Income Statements                                                                         Q1                         Q2Sales                                                               $165,000Cost of goods sold                                          115,500Gross profit                                                      49,500Operating expenses                                        138,000Depreciation expense                                      131,250Income before interest &taxes                      (219,750)Interest expense                                              25,000Income before taxes                                      (244,750)Income tax (expense)/recovery                    122,375Net Income                                                    $(122,375)PRO FORMA Quarterly Balance Sheets                                                                                Q1                                 Q2Cash                                                                  $815,500Accounts receivable                                          110,000Inventory                                                            947,000Plant & equipment                                          10,500,000Accumulated depreciation                              (4,031,250)Total Assets                                                      $8,341,250Accounts payable                                            $125,000Line of credit                                                            0Interest payable                                                25,000Taxes payable                                                    (122,375)Current portion of LT debt                                  200,000Long-term debt                                                  3,400,000Common shares                                                1,800,000Retained earnings                                              2,913,625Total Liabilities & Sh. Equity                            $8,341,250 Il IIXYZ Inc.'TER 5Balance Sheet as at December 31, 2020(s000, ui)MONEY$1501,750310$2,210ASSETS100 a YAccounts receivable I Q20 + 930.1InventoryCashTotal current assets$10,500Property, plant and equipment (“PP&E&#34;)Less: Accumulated depreciationPP&E, net$8.810Total assetsLIABILITIES AND SHAREHOLDERS' EQUITYAccounts payableBank loan (line of credit)Interest payableInceme tax payable [paidMarch 81,202/Current portion of long-term debt$125215200 current tong ten$5743,4007non3,974betTotal current liabilitiescurrent LicketLong-term debt [net of current portion]Total liabilitiesCommon shares [Capital stock]Retained earningsTotal liabilities and shareholders' equity3,036$8.810ACTUAL sales for 2020 (in '000s):November$820December$930PROJECTED (estimated) sales for 2021 (in '000s):%$455$55$55$55JanuaryFebruary QJulyAugustSeptember$80$55006924$830MarchOctoberMayNovember$85009$DecemberJune0962$REQUIRED:Janl-Mar 31Jan |-Prepare Pro-Forma financial statements for the first quarter of 2021 [L&#34;HIGHLY SEASONAL&#34;:January to July Sales9.77% of yearly salesAugust to December Sales == 90.23% of yearly salesTotal Sales$4.3004-32 QuestionYou have been provided with the 2020 financial statements of XYZ Inc. (XYZ) (reproduced below)and the following additional information fall amounts are in '000s]:The demand for XYZ's products is highly seasonal, but the firm employs level productionthroughout the year because of its limited plant capacity. YmallCost of goods sold (&#34;COGS&#34;) is 70% of sales. Estimated costs of goods manufactured (&#34;COGM)for 2021 is 3,010. Due to level production, the value of goods produced each month is the same.[COGM =_total sales(4300x 703,010 and Monthly production = 3,010 : 12more sale-) more U= $250.833]Accounts payable, for the'purchases of raw materials &#34;RM&#34;A, are paid in the month followingpurchase and owing to level production, are constant at $125 at the end of each month.Thus, purchases each month =125%3DJOURNAL ENTRIES:Acct Paya ble12525• Operating expenses are $46 per month. OSAP• Depreciation expense (on non-manufacturing assets) is calculated on a straight-line basis andequals $525 per year.All sales are on credit and accounts receivable are collected 2 months after the sale. Bad debtsare negligible.• XYZ wants to maintain a MINIMUM cash balance of $150. The company has a $1,000 lineof credit available at the bank that is used for any cash defíciencies (as needed). Any excesscash over the minimum reguired will be used to reduce the line of credit, where applicable.Income taxes are levied at a rate of 50 percent and are paid three)months after the year-end(for the full year).Long-term debt repayments of $100 and interest payments of $50 are made at the end of Junand December. For simplicity, ignore interest on the line of credit.• Annual dividends of $15 are declared and paid at the end of December.XYZ Inc.Income Statement for the Year Ended December 31, 2020$44,149Sales2,904$1,245Cost of goods soldGross marginOperating expensesDepreciation expense552525Income before interest and taxes$168000$68Interest expenseIncome before taxesIncome tax expense34Net income%2434

Accepted Answer

Income Statement
The purpose of preparing the income statement to know the net income which are…