Preparing a financial budget—budgeted income statement and balance sheet Ball 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 $ 121,800 Budgeted purchases of merchandise inventory, all on account 60,400 Budgeted cost of goods sold 60,900 Budgeted selling and administrative expenses:

Commissions expense 6,090 Salaries expense 7,000 Rent expense 4,100 Depreciation expense 600 Insurance expense 400 Budgeted cash receipts from customers 125,840 Budgeted cash payments for merchandise inventory 67,775 Budgeted cash payments for salaries and commissions 14,822 Budgeted income tax expense 5,400 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.

Step by step solution

01

Preparation of Income statement

Ball Company Income Statement For the quarter ended March 31, 2019
	March Quarter
Net sales revenue	$121,800
Cost of goods sold	$60,900
Gross profit	$60,900
Selling and administrative expenses	$18,190
Operating income	$42,710
Income tax	$5,400
Net income	$37,310

02

Preparation of Balance sheet

Ball Company Budgeted Balance Sheet For the quarter ended March 31, 2019
Assets
Current Assets:
Cash	$56,743
Accounts Receivables	$27,960
Raw material inventory	$12,132
Total current assets
Property, plant, and equipment
Equipment	$60,000
Less: Accumulated depreciation	($10,600)	$49,400
Total Assets		$146,235
Liabilities
Current Liabilities:
Accounts payable	$16,625
Stockholder’s Equity
Common stock, no par	$18,000
Retained earnings	$111,610
Total stockholder’s equity		$129,610
Total liabilities and stockholder’s equity		$146,235

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