Question

*Exercise 5-30 Bill Thomas, Sunland & Hill's controller, has received all the budgets prepared by the various operating units and is ready to compile the pro-forma financial statements for the first quarter. The company's balance sheet of December 31 is as follows: Cash Accounts Receivable (net) Finished Goods Inventory Raw Materials Inventory Property, Plant & Equipment Accumulated Depreciation Total Assets Accounts Payable Income Tax Payable Common Stock Retained Earnings Total Liabilities & Owners Equity $ 33,600 32,760 27,440 4,234 168,000 (42,000 ) $224,034 $ 10,080 42,146 56,000 115,808 $224,034 Selected Estimates Budgeted revenue Selling and administrative expense Interest expense Cash Cost of Goods Sold Accounts receivable (net) Direct materials Finished goods Acounts payable Notes payable Quarter $789,600 149,184 1,893 17,234 561,887 76,440 3,114 33,048 18,592 22,960 Additional Information: • Bates & Hill plans to declare and pay dividends totaling $27,440 in January. Bates & Hill plans to purchase and pay cash for a piece of land in February at a cost of $40,320. Bates & Hill plans to purchase equipment in March at a cost of $33,600 Depreciation for manufacturing overhead $16,800 per month and for selling and administrative $5,600 per month. • The company expects a 17% income tax rate, and all quarterly taxes are paid in the first month of the following quarter.

Answer 1

Sunland & Hill Income Statement First Quarter Sales Revenue Less: Cost of goods sold Gross margin Less: Selling and administrative expense Operating Income Less: Interest expense Income before taxes Less: Income tax expense ($76,636 * 17%) Net income $789.600 $561,887 $227,713 $149.184 $78,529 $1,893 $76,636 $13,028 $63,608 Sunland & Hill Balance sheet March 31 Cash Accounts Receivable Direct Materials Inventory Finished Goods Inventory Property, Plant &amp: Equipment ($168,000+ $40.320 + $33.600) Accumulated Depreciation (S42,000+ ($16,800 * 3) + ($5,600 * 3)] Total Assets Accounts Payable Income taxes Payable Note Payable Common Stock Retained Earnings ($115.808 + $63,608 - $27.440) Total Liabilities and Equities $17.234 $76,440 $3,114 $33,048 $241.920 -S109.200 $262,556 $18,592 $13.028 $22.960 $56,000 $151,976 $262,556