Preparing a financial budget—budgeted income statement and balance sheet

Ballentine 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 $ 305,500 Budgeted direct materials to be purchased and used 40,000 Budgeted direct labor cost 12,500 Budgeted manufacturing overhead costs: Variable manufacturing overhead 2,600 Depreciation 800 Insurance and property taxes 1,100 Budgeted cost of goods sold 71,300 Budgeted selling and administrative expenses: Salaries expense7,000 Rent expense 3,500 Insurance expense 2,000 Depreciation expense 350 Supplies expense 3,055 Budgeted cash receipts from customers 263,500 Budgeted income tax expense 44,000 Budgeted purchase and payment for capital expenditures

(additional equipment) 34,000

Additional information:

a. Direct materials purchases are paid 50% in the quarter purchased and 50% in the next quarter.

b. Direct labor, ma following budgeted income statement manufacturing overhead, selling and administrative costs, and income tax expense are paid in the quarter incurred.

c. Accounts payable at December 31, 2018 are paid in the first quarter of 2019. Requirements

1. Prepare Ballentine Company’s budgeted income statement for the first quarter of 2019.

2. Prepare Ballentine Company’s budgeted balance sheet as of March 31, 2019.

Step by step solution

01

Preparation of Income statement

Ballentine Company Income Statement For the first quarter, 2019
	First Quarter
Net sales revenue	$305,500
Cost of goods sold	$71,300
Gross profit	$234,200
Selling and administrative expenses	$15,905
Operating income	$218,295
Income tax	$44,000
Net income	$174,295

02

Preparation of Balance sheet

Ballentine Company Budgeted Balance Sheet As of March, 2019
Assets
Current Assets:
Cash	$184,945
Accounts Receivables	$59,900
Inventory	$11,600
Total current assets		$216,295
Property, plant, and equipment
Equipment	$154,000
Less: Accumulated depreciation	($20,350)	$133,650
Total Assets		$349,945
Liabilities
Current Liabilities:
Accounts payable	$37,300
Stockholder’s Equity
Common stock, no par	$85,000
Retained earnings	$267,795
Total stockholder’s equity		$352,795
Total liabilities and stockholder’s equity		$390,095

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