Question

The management of Mecca Copy, a photocopying center located on University Avenue, has compiled the following data to use in preparing its budgeted balance sheet for next year: Ending Balances Cash Accounts receivable Supplies inventory Equipment Accumulated depreciation Accounts payable Common stock Retained earnings $ 8.600 $ 4,900 $ 36,500 $ 14,800 $ 2.300 $ 5,000 The beginning balance of retained earnings was $33,000, net income is budgeted to be $17.500, and dividends are budgeted to be $3,300. Required: Prepare the company's budgeted balance sheet. (Amounts to be deducted should be indicated by a minus sign.) Mecca Copy Budgeted Balance Sheet Assets Current assets: Total current assets Plant and equipment: < Prev 9 of 9 Next > 00

Answer 1

Working note 1 - Computation of ending balance of retained Earnings:
Beginning balance of Retained Earnings	$33,000
Add: Net Income	$17,500
	$50,500
Less: Dividends	$3,300
Ending balance of retained earnings	$47,200

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Working note 2 - Computation of cash balance We can find cash balance by using the accounting equation or balance sheet equation. The accounting equation is as follows: Assets = Liabilities + Stockholder's Equity Assets = Cash + Accounts receivable + Supplies inventory + Equipment cost - Accumulated depreciation) = Cash + $8.600 + 54.900 + ($36,500 - $14.800) = Cash + $35,200 ► Liabilities = Accounts payable = $2,300 ► Stockholder's Equity = Common stock + Ending balance of retained earnings = $5,000+ $47,200 = $52,200 Assets = Liabilities + Stockholder's Equity Cash + $35,200 = $2,300 + $52,200 Cash = $2,300 + $52,200 - $35,200 = $19,300 Cash balance = $19,300

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Mecca Copy
Budgeted Balance Sheet
Assets
Current Assets:
Cash              [Refer working note 2]	$19,300
Accounts Receivable	$8,600
Supplies inventory	$4,900
Total current assets		$32,800
Plant and Equipment:
Equipment	$36,500
Less: Accumulated depreciation - Equipment	($14,800)
Plant and Equipment, net		$21,700
Total Assets        [$32,800 + $21,700]		$54,500
Liabilities and Stockholder’s Equity
Current Liabilities:
Accounts payable		$2,300
Shareholders' Equity
Common stock	$5,000
Retained earnings    [Refer working note 1]	$47,200
Total shareholders' equity		$52,200
Total liabilities and shareholders' equity    [$2,300 + $52,200]		$54,500