Preparing a financial budget—budgeted income statement and balance sheet

Buncomb Companyhas 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.

Step by step solution

01

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

02

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

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