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In: Accounting

ABC INC, announces the following accounts and balances on 12/31/17: Cash                            $15,000 Equipment (

ABC INC, announces the following accounts and balances on 12/31/17:

Cash                            $15,000

Equipment (net)            20,000

Inventory                    85,000

Retained Earnings       30,000

Common Stock            90,000

During the first quarter [January _ March] of 2018 the business gauges they will sell 150 units of an item at a cost of $200 per unit. All units are sold on account. The business estimates the account receivable balance will be 15% of the sales revenue for the quarter. The business plans to buy 120 units of an item at a cost of $125 per unit during the quarter. They estimate the account payable balance will be 25% of the budgeted quarterly purchases at the end of the quarter. The business estimates selling & general/administrative expenses of $9,000 for the quarter ($500 of this amount is for depreciation expense).

Prepare a budgeted income statement for the first quarter of 2018 and a budgeted balance sheet as of 3/31/18.

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Expert Solution

Balance sheet as on 31.12.2017
Assets $ Liabilities $
Cash 15000 Retained Earnings 30000
Equipment 20000 Common stock 90000
Inventory 85000
120000 120000
Income statement for the period 01.01.2018 - 31.03.2018
Units selling price Value
Sales 150 200 30000
Opening stock 85000
Purchase 120 125 15000
Closing stock 70000
Cost of Goods sold 30000
Depreciation 500
Selling & Admin(except dep) 8500
Total cost 39000
Net Margin -9000
Balance sheet as on 31.03.2018
Assets $ Liabilities $
Cash 20750 Retained Earnings 30000
Accounts receivable 4500 Add margin during the Quarter -9000
Equipment $ 20000 Net retained earnings 21000
Less :Depreciation $500 19500 Accounts payable 3750
Inventory 70000 Common stock 90000
114750 114750
Working:
Account receivable balance 4500
30000*15%
Account payable balance 3750
15000*25%
Cash 15000
ADD:cash received during the Quarter 25500
30000*85%
Less:Cash Paid during the Quarter 11250
15000*75%
Less: Selling & Distribution exp 8500
Cash in Hand on 31.03.2018 20750
Inventory
Opening 85000
Add Purchase 15000
Less sales 30000
Closing Inventory 70000

ekkarill92 answered 2 years ago
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