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Horngren'S Financial And Managerial Accounting
Found in: Page 1258

Short Answer

Preparing a financial budget—budgeted income statement and balance sheet

Buncomb Company has the following post-closing trial balance on December 31, 2018:

The company’s accounting department has gathered the following budgeting information for the first quarter of 2019:

Budgeted total sales, all on account $ 121,700 Budgeted purchases of merchandise inventory,

all on account 61,200 Budgeted cost of goods sold 60,850 Budgeted selling and administrative expenses: Commissions expense 6,085 Salaries expense 3,000 Rent expense 4,100 Depreciation expense 900 Insurance expense 300 Budgeted cash receipts from customers 126,450 Budgeted cash payments for merchandise inventory 67,925 Budgeted cash payments for salaries and commissions 14,836 Budgeted income tax expense 4,700 Additional information:

Rent and income tax expenses are paid as incurred. Insurance expense is an expiration of the prepaid amount.

Requirements

  1. Prepare a budgeted income statement for the quarter ended March 31, 2019.
  2. 2. Prepare a budgeted balance sheet as of March 31, 2019.

  1. The net income is $41,415.
  2. Total of balance sheet is $97,890
See the step by step solution

Step by Step Solution

Step 1: Preparation of Income statement

BUNCOMB Company

Income Statement

For the quarter ended March 31, 2019

March Quarter

Net sales revenue

$121,700

Cost of goods sold

$61,200

Gross profit

$60,500

Selling and administrative expenses

$14,385

Operating income

$46,115

Income tax

$4,700

Net income

$41,415

Step 2: Preparation of Balance sheet

BUNCOMB Company

Budgeted Balance Sheet

For the quarter ended March 31, 2019

Assets

Current Assets:

Cash

$54,989

Accounts Receivables

$16,451

Raw material inventory

$12,132

Prepaid insurance

$2,100

Total current assets

Property, plant, and equipment

Equipment

$30,000

Less: Accumulated depreciation

($20,900)

$9,100

Total Assets

$97,890

Liabilities

Current Liabilities:

Accounts payable

$19,275

Stockholder’s Equity

Common stock, no par

$14,000

Retained earnings

64,615

Total stockholder’s equity

$78,615

Total liabilities and stockholder’s equity

$97,890

Most popular questions for Business-studies Textbooks

: Completing a comprehensive budgeting problem—merchandising company

Belton Printing Company of Baltimore has applied for a loan. Its bank has requested a budgeted income statement for the month of April 2018 and a balance sheet at April 30, 2018. The March 31, 2018, balance sheet follows:

As Belton Printing’s controller, you have assembled the following additional information:

a. April dividends of $7,000 were declared and paid.

b. April capital expenditures of $17,000 budgeted for cash purchase of equipment.

c. April depreciation expense, $800.

d. Cost of goods sold, 55% of sales.

e. Desired ending inventory for April is $24,800.

f. April selling and administrative expenses includes salaries of $29,000, 20% of which will be paid in cash and the remainder paid next month.

g. Additional April selling and administrative expenses also include miscellaneous expenses of 10% of sales, all paid in April.

h. April budgeted sales, $86,000, 80% collected in April and 20% in May.

i. April cash payments of March 31 liabilities incurred for March purchases of inventory, $8,300.

j. April purchases of inventory, $22,900 for cash and $37,200 on account. Half the credit purchases will be paid in April and half in May

Requirements

1. Prepare the sales budget for April.

2. Prepare the inventory, purchases, and cost of goods sold budget for April.

3. Prepare the selling and administrative expense budget for April.

4. Prepare the schedule of cash receipts from customers for April.

5. Prepare the schedule of cash payments for selling and administrative expenses for April.

6. Prepare the cash budget for April. Assume the company does not use short-term financing to maintain a minimum cash balance.

7. Prepare the budgeted income statement for April.

8. Prepare the budgeted balance sheet at April 30, 2018.

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