Question

*Exercise 5-30 Bill Thomas, Marigold & 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 $ 24,000 23,400 19,600 3,024 120,000 (30,000) $160,024 $ 7,200 30,104 40,000 82,720 $160,024 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 $564,000 106,560 1,352 12,310 401,348 54,600 2,224 23,606 13,280 16,400 Additional Information: • Bates & Hill plans to declare and pay dividends totaling $19,600 in January. Bates & Hill plans to purchase and pay cash for a piece of land in February at a cost of $28,800. Bates & Hill plans to purchase equipment in March at a cost of $24,000. Depreciation for manufacturing overhead $12,000 per month and for selling and administrative $4,000 per month. • • The company expects a 12% income tax rate, and all quarterly taxes are paid in the first month of the following quarter.

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$564,000 $401,348 $162,652 Marigold & Hill Income Statement First Quarter Budgeted Revenues Cost of Goods sold Gross profit Operating Expenses Selling and administrative expenses Profit before interest Less: Interest expense Profit before tax Less: Income tax Net Income $106,560 $56,092 $1,352 $54,740 $6,569 $48,171 Marigold & Hill BALANCE SHEET MARCH 31 Assets Current Assets Cash $12,310 Accounts Receivable $54,600 Finished Goods Inventory $23,606 Raw Materials Inventory $2,224 Total Current Assets $92,740 Fixed Assets Property Plant and Equipment Add: Purchases $120,000 $52,800 $172,800 $78,000 Less: Accumulated Depreciation Total Fixed Assets $94,800 $187,540 Total Assets Liabilities and Stockholders' Equity Current Liabilities Accounts payable Income Tax payable Total Current Liabilities $13,280 $6,569 $19,849 Long term liabilities Notes payable $16,400 Stockholders' Equity Common Stock Retained Earnings $40,000 $111,291 $151,291 Liabilities and Stockholders' Equity $187,540 Working note Marigold & Hill Statement of Retained Earnings Opening Balance Add: Net profit during the year $82,720 $48,171 $130,891 $19,600 $111,291 Less: Dividend Closing balance of Retained Earnings