Monthly sales budget

Question

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Answer 1

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 22, Problem 8BPSB

Requirement 1-

To determine

To prepare:

Monthly sales budget

Requirement 1-

Expert Solution

Answer to Problem 8BPSB

Solution:

A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.

ISLE Corporation
Monthly sales budget (in units and sales value)

	January	February	March	Quarter
Sales in units	6,000	8,000	10,000	24,000
Selling price per unit	$45	$45	$45	$45
Dollar sales value($)	270,000	360,000	450,000	1,080,000

Explanation of Solution

Dollar sales value for each month is calculated as follows-

$Dollar sales value=Sales in units×Selling price per unitDollar sales value for January=6,000×$45 Dollar sales value for January=$270,000 Dollar sales value for February=8,000×$45 Dollar sales value for February=$360,000 Dollar sales value for March=10,000×$45 Dollar sales value for March=$450,000 Dollar sales value for Quarter=24,000×$45 Dollar sales value for Quarter=$1,080,000$

Conclusion

Thus, the monthly sales budget has been prepared both in units and sales value.

Requirement 2-

To determine

To prepare:

Merchandise purchases budget

Requirement 2-

Expert Solution

Answer to Problem 8BPSB

Solution:

Budgeted purchases: Budgeted purchases are the estimates of purchases of a particular month based on the sales requirement and ending inventory requirement and the budgeted beginning inventory.

ISLE Corporation
Monthly merchandise purchases budgets

	January	February	March	Quarter
Budgeted Sales for the month	6,000	8,000	10,000
Ending inventory in units	2,000	2,500	2,250
Total Needs	8,000	10,500	12,250
Less: Beginning inventory	(5,000)	(2,000)	(2,500)
Merchandise purchases in units required	3,000	8,500	9,750
Cost per unit	$30	$30	$30
Dollar value of purchases ($)	90,000	255,000	292,500	637,500

Explanation of Solution

First, ending inventory in units is required to be calculated-
Calculation of ending inventory in units is as under-

$Ending inventory requirement = 25% of Next Months Expected sales unitsEnding inventory requirement for January =25%X Expected sales units for FebruaryEnding inventory requirement for January =25%X 8,000 unitsEnding inventory requirement for January =2,000 unitsEnding inventory requirement for February =25%X Expected sales units for MarchEnding inventory requirement for February =25% X 10,000 unitsEnding inventory requirement for February =2,500 unitsEnding inventory requirement for March =25%X Expected sales units for AprilEnding inventory requirement for March =25% X 9,000unitsEnding inventory requirement for March = 2,250 units$

Now, Merchandise purchases required is to be calculated-

$Required merchandise purchases= Ending Inventory + Expected sales of the month – Beginning Inventory$

Given, Expected sales of the month-

January − 6,000 units
February − 8,000 units
March − 10,000 units

January − 2,000 units
February − 2,500 units
March − 2,250 units

Ending inventory of the previous month shall be beginning inventory of current month.

January − 5,000 units (given)
February - 2,000 units
March − 2,500 units

$Required merchandise purchases = Ending Inventory + Expected sales of the month – Beginning Inventory Required merchandise purchases for January=2,000 units+6,000 units–5,000 units Required merchandise purchases for January=3,000 units Required merchandise purchases for February=2,500 units+8,000 units–2,000 units Required merchandise purchases for February =8,500units Required merchandise purchases for March=2,250 units+10,000 units–2,500 units Required merchandise purchases for March=9,750units$

Dollar Value of purchases is calculated as follows-

$Dollar value of purchase =Required merchandise purchase × Cost per unit Dollar value of purchase for January=3,000 units×$30Dollar value of purchase for January=$90,000 Dollar value of purchase for February=8,500 units×$30 Dollar value of purchase for February=$255,000 Dollar value of purchase for March=9,750 units×$30 Dollar value of purchase for March=$292,500$

Conclusion

Thus, the merchandise purchase budget has been prepared for the months of January, February and March.

Requirement 3-

To determine

To prepare:

Monthly selling expense Budget

Requirement 3-

Expert Solution

Answer to Problem 8BPSB

Solution:

ISLE Corporation
Monthly Selling Expense budgets

	January ($)	February ($)	March ($)
Sales commissions	54,000	72,000	90,000
Sales salaries	7,500	7,500	7,500
Selling expenses	61,500	79,500	97,500

Explanation of Solution

First we need to calculate Sales commissions.
Calculation of sales commission is as under-

$Sales Commission=20%×SalesSales Commission for January=20%×$270,000 Sales Commission for January=$54,000 Sales Commission for February=20%×$360,000 Sales Commission for February=$72,000 Sales Commission for March=20%×$450,000 Sales Commission for March=$90,000$

Sales salary for each month-

$Sales salary for each month= $90,000 12 monthsSales salary for each month=$7,500$

Selling expense for each month is calculated as under-

$Selling Expense=Sales Commission+Sales salarySelling Expense for January=$54,000+$7,500 Selling Expense for January=$61,500 Selling Expense for February=$72,000+$7,500 Selling Expense for February=$79,500 Selling Expense for March=$90,000+$7,500 Selling Expense for March=$97,500$

Conclusion

Thus, the selling expense budget is prepared for the month of January, February and March.

Requirement 4-

To determine

To prepare:

Monthly general and administrative expense Budget

Requirement 4-

Expert Solution

Answer to Problem 8BPSB

Solution:

ISLE Corporation
Monthly general and administrative budgets

	January	February	March
General and administrative salaries	12,000	12,000	12,000
Maintenance expense	3,000	3,000	3,000
Total general and administrative expenses	15,000	15,000	15,000

Explanation of Solution

Given: Maintenance Expense = $3,000 per month
General and administrative salaries for each month-

$General and administrative salaries for each month= Total salary for year 12 monthsGeneral and administrative salaries for each month= $144,000 12 monthsGeneral and administrative salaries for each month=$12,000$

Total General and administrative expenses for each month is calculated as under-

$Total General and administrative expenses= General and administrative salaries+Maintenance Expense Total General and administrative expenses for January=$12,000+$3,000Total General and administrative expenses for January=$15,000 Total General and administrative expenses for February=$12,000+$3,000 Total General and administrative expenses for February=$15,000 Total General and administrative expenses for March=$12,000+$3,000 Total General and administrative expenses for March=$15,000$

Conclusion

Thus, the general and administrative expenses budget is prepared for the month of January, February and March.

Requirement 5-

To determine

To prepare:

Monthly capital expenditures Budget

Requirement 5-

Expert Solution

Answer to Problem 8BPSB

Solution:

ISLE Corporation
Capital Expenditures budget

	January	February	March	Quarter
Purchase of Equipment	72,000	96,000	28,800	196,800
Purchase of Land	0	0	150,000	150,000
Total Capital expenditure	72,000	96,000	178,800	346,800

Explanation of Solution

Given-

Purchase of Equipment in January = $72,000
Purchase of Equipment in February = $96,000
Purchase of Equipment in March = $28,800
Purchase of Land in March = $150,000

$Total capital expenditure in March= Purchase of Equipment+ Purchase of LandTotal capital expenditure in March=$28,800 + $150,000Total capital expenditure in March=$178,800$

Conclusion

Thus, Capital expenditure budget is prepared.

Requirement 6-

To determine

To prepare:

Monthly Cash Budget

Requirement 6-

Expert Solution

Answer to Problem 8BPSB

Solution:

ISLE Corporation
Monthly cash budgets

	January	February	March
Beginning cash balance	36,000	198,000	123,000
Cash receipts:
Cash sales	67,500	90,000	112,500
Collection from -
Beginning accounts receivable	315,000	210,000
Credit sales of January		121,500	81,000
Credit sales of February			162,000
Total cash receipts	382,500	421,500	355,500
Total cash available	418,500	619,500	478,500
Less: Cash disbursements-
Merchandise purchases
Beginning accounts payable	72,000	288,000
January accounts payable		18,000	72,000
February accounts payable			51,000
Selling expenses	61,500	79,500	97,500
General and administrative expenses	15,000	15,000	15,000
Capital Expenditure	72,000	96,000	178,800
Taxes			90,000
Total cash disbursements	220,500	496,500	504,300
Surplus/ ( deficiency) of cash	198,000	123,000	(25,800)
Borrowing / ( Repayment)			61,800
Ending cash balance	198,000	123,000	36,000

Explanation of Solution

Cash sales is calculated as under-

$Cash sales = 25% ×Total sales of the month Cash sales for January=25%×$270,000 Cash sales for January=$67,500 Cash sales for February=25%×$360,000 Cash sales for February=$90,000 Cash sales for March=25%×$450,000Cash sales for March=$112,500$

Beginning accounts receivable-
Given-

January-$315,000
February-$210,000

For the month of February-

$Credit sale receipt in the month of February=60%×January Credit salesCredit sale receipt in the month of February=60%×[Total January sales ×75%]Credit sale receipt in the month of February=60%×[$270,000×75%]Credit sale receipt in the month of February=60%×$202,500Credit sale receipt in the month of February=$121,500$

For the month of March-

$Credit sale receipt ={ 40%×January Credit sales}+{ 60%×February Credit sales} Credit sale receipt ={ 40%×[ Total January sales ×75%]}+{ 60%×[ Total February sales ×75%]} Credit sale receipt ={ 40%×[ $270,000×75%]}+{ 60%×[ $360,000×75%]} Credit sale receipt ={ 40%×$202,500}+{ 60%×$270,000} Credit sale receipt =$81,000+$162,000Credit sale receipt =$243,000$

Beginning accounts payable-
Given-

January-$72,000
February-$288,000

For the month of February-

$Accounts payable=20%×January purchases Accounts payable=20%×$90,000Accounts payable=$18,000$

For the month of March-

$Accounts payable=( 80%×January purchases)+( 20%×February purchases)Accounts payable=( 80%×$90,000)+( 20%×$255,000)Accounts payable=$72,000+$51,000Accounts payable=$123,000$

Requirement 7-

To determine

To prepare:

Budgeted income statement

Requirement 7-

Expert Solution

Answer to Problem 8BPSB

Solution:

ISLE Corporation
Income Statement

Particulars	Amount ($)	Amount ($)
Sales		1,080,000
Cost of merchandise sold		720,000
Gross Profit		360,000
Operating expenses:
Selling expenses	238,500
General and administrative expenses	45,000
Depreciation expense	21,425	304,925
Income before tax		55,075
Tax @ 40%		22,030
Net operating income		33,045

Explanation of Solution

Income before tax-

$Income before tax= Sales−Cost of goods sold−Selling Expense −General and administrative expenses− Depreciation expenseIncome before tax=$1,080,000−$720,000−$238,500−$45,000−$21,425Income before tax=$55,075$

Tax Expense-

$Tax Expense=Income before tax×Tax RateTax Expense=$55,075×40%Tax Expense=22,030$

Net Operating income is calculated as under-

$Net Operating income= Income before tax−Tax ExpenseNet Operating income=$55,075−$22,030Net Operating income=33,045$

Conclusion

Thus, Income statement is prepared for the quarter.

Requirement 8-

To determine

To prepare:

Budgeted Balance sheet.

Requirement 8-

Expert Solution

Answer to Problem 8BPSB

Solution:

ISLE Corporation
Balance sheet as of March 31, 2016

	Amount ($)	Amount ($)
Assets
Cash	36,000
Accounts receivable	445,500
Inventory	67,500
Total current assets		549,000
Land		150,000
Equipment gross	736,800
Accumulated depreciation	(88,925)
Equipment net		647,875
Total assets		1,346,875
Stockholder's Equity and Liabilities
Accounts payable	496,500
Bank loan payable	76,800
Tax payable	22,030
Current liabilities		595,330
Common stock		472,500
Retained earnings		279,045
Total Stockholder's Equity and Liabilities		1,346,875

Explanation of Solution

Assets
Given,
Land = $150,000 (from Requirement 5)
Cash = $36,000 (from Requirement 6)
Accounts receivable-
$Accounts receivable=Beginning receivables+ Credit sales−CollectionsAccounts receivable=$525,000+$810,000−$889,500Accounts receivable=$445,500$

Inventory-
$Inventory=Beginning inventory+Purchases−Cost of goods soldInventory=$150,000+$637,500−$720,000Inventory=$67,500$

Calculation of total current assets is as under-

$Current assets= Cash + Accounts receivable+Inventory Current assets=$36,000+$445,500+$67,500Current assets=$549,000$

Accumulated Depreciation-
$Accumulated depreciation=Beginning Accumulated depreciation+Depreciation expenses Accumulated depreciation=$67,500+$21,425Accumulated depreciation=$88,925$

Equipment-
$Equipment =Equipment gross−Accumulated Depreciation Equipment =$736,800−$88,925Equipment ==$647,875$

Calculation of total assets is as under-
$Total Assets=Total Current assets+Land+Equipment Total Assets=$549,000+$150,000+$647,875Total Assets=$1,346,875$

Total Stockholder's Equity and Liabilities Given,
Taxes payable = 22,030 (from requirement 7)
Common stock = $472,500

Accounts payable-
$Accounts payable =Beginning payables+Purchases−PaymentsAccounts payable =$360,000+$637,500−$501,000Accounts payable =$496,500$

Calculation of Current liabilities is as under-

$Current liabilities=Accounts payable+Bank loan payable+Taxes payableCurrent liabilities=$496,500+$76,800+$22,030Current liabilities= $595,330$

Retained earnings-
$Retained earnings = Beginning retained earnings + Net IncomeRetained earnings =$246,000+$33,045Retained earnings =$279,045$

Calculation of Total Stockholder's Equity and Liabilities is as under-
$Total Stockholder's Equity and Liabilities=Current liabilities+Common stock+ Retained earnings Total Stockholder's Equity and Liabilities=$595,330+$472,500+$279,045Total Stockholder's Equity and Liabilities=$1,346,875$

Conclusion

Thus, Budgeted balance sheet is prepared with total of $1,346,875.

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Answer 2

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 22, Problem 8BPSB

Requirement 1-

To determine

To prepare:

Monthly sales budget

Requirement 1-

Expert Solution

Answer to Problem 8BPSB

Solution:

A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.

ISLE Corporation
Monthly sales budget (in units and sales value)

	January	February	March	Quarter
Sales in units	6,000	8,000	10,000	24,000
Selling price per unit	$45	$45	$45	$45
Dollar sales value($)	270,000	360,000	450,000	1,080,000

Explanation of Solution

Dollar sales value for each month is calculated as follows-

$Dollar sales value=Sales in units×Selling price per unitDollar sales value for January=6,000×$45 Dollar sales value for January=$270,000 Dollar sales value for February=8,000×$45 Dollar sales value for February=$360,000 Dollar sales value for March=10,000×$45 Dollar sales value for March=$450,000 Dollar sales value for Quarter=24,000×$45 Dollar sales value for Quarter=$1,080,000$

Conclusion

Thus, the monthly sales budget has been prepared both in units and sales value.

Requirement 2-

To determine

To prepare:

Merchandise purchases budget

Requirement 2-

Expert Solution

Answer to Problem 8BPSB

Solution:

Budgeted purchases: Budgeted purchases are the estimates of purchases of a particular month based on the sales requirement and ending inventory requirement and the budgeted beginning inventory.

ISLE Corporation
Monthly merchandise purchases budgets

	January	February	March	Quarter
Budgeted Sales for the month	6,000	8,000	10,000
Ending inventory in units	2,000	2,500	2,250
Total Needs	8,000	10,500	12,250
Less: Beginning inventory	(5,000)	(2,000)	(2,500)
Merchandise purchases in units required	3,000	8,500	9,750
Cost per unit	$30	$30	$30
Dollar value of purchases ($)	90,000	255,000	292,500	637,500

Explanation of Solution

First, ending inventory in units is required to be calculated-
Calculation of ending inventory in units is as under-

$Ending inventory requirement = 25% of Next Months Expected sales unitsEnding inventory requirement for January =25%X Expected sales units for FebruaryEnding inventory requirement for January =25%X 8,000 unitsEnding inventory requirement for January =2,000 unitsEnding inventory requirement for February =25%X Expected sales units for MarchEnding inventory requirement for February =25% X 10,000 unitsEnding inventory requirement for February =2,500 unitsEnding inventory requirement for March =25%X Expected sales units for AprilEnding inventory requirement for March =25% X 9,000unitsEnding inventory requirement for March = 2,250 units$

Now, Merchandise purchases required is to be calculated-

$Required merchandise purchases= Ending Inventory + Expected sales of the month – Beginning Inventory$

Given, Expected sales of the month-

January − 6,000 units
February − 8,000 units
March − 10,000 units

January − 2,000 units
February − 2,500 units
March − 2,250 units

Ending inventory of the previous month shall be beginning inventory of current month.

January − 5,000 units (given)
February - 2,000 units
March − 2,500 units

$Required merchandise purchases = Ending Inventory + Expected sales of the month – Beginning Inventory Required merchandise purchases for January=2,000 units+6,000 units–5,000 units Required merchandise purchases for January=3,000 units Required merchandise purchases for February=2,500 units+8,000 units–2,000 units Required merchandise purchases for February =8,500units Required merchandise purchases for March=2,250 units+10,000 units–2,500 units Required merchandise purchases for March=9,750units$

Dollar Value of purchases is calculated as follows-

$Dollar value of purchase =Required merchandise purchase × Cost per unit Dollar value of purchase for January=3,000 units×$30Dollar value of purchase for January=$90,000 Dollar value of purchase for February=8,500 units×$30 Dollar value of purchase for February=$255,000 Dollar value of purchase for March=9,750 units×$30 Dollar value of purchase for March=$292,500$

Conclusion

Thus, the merchandise purchase budget has been prepared for the months of January, February and March.

Requirement 3-

To determine

To prepare:

Monthly selling expense Budget

Requirement 3-

Expert Solution

Answer to Problem 8BPSB

Solution:

ISLE Corporation
Monthly Selling Expense budgets

	January ($)	February ($)	March ($)
Sales commissions	54,000	72,000	90,000
Sales salaries	7,500	7,500	7,500
Selling expenses	61,500	79,500	97,500

Explanation of Solution

First we need to calculate Sales commissions.
Calculation of sales commission is as under-

$Sales Commission=20%×SalesSales Commission for January=20%×$270,000 Sales Commission for January=$54,000 Sales Commission for February=20%×$360,000 Sales Commission for February=$72,000 Sales Commission for March=20%×$450,000 Sales Commission for March=$90,000$

Sales salary for each month-

$Sales salary for each month= $90,000 12 monthsSales salary for each month=$7,500$

Selling expense for each month is calculated as under-

$Selling Expense=Sales Commission+Sales salarySelling Expense for January=$54,000+$7,500 Selling Expense for January=$61,500 Selling Expense for February=$72,000+$7,500 Selling Expense for February=$79,500 Selling Expense for March=$90,000+$7,500 Selling Expense for March=$97,500$

Conclusion

Thus, the selling expense budget is prepared for the month of January, February and March.

Requirement 4-

To determine

To prepare:

Monthly general and administrative expense Budget

Requirement 4-

Expert Solution

Answer to Problem 8BPSB

Solution:

ISLE Corporation
Monthly general and administrative budgets

	January	February	March
General and administrative salaries	12,000	12,000	12,000
Maintenance expense	3,000	3,000	3,000
Total general and administrative expenses	15,000	15,000	15,000

Explanation of Solution

Given: Maintenance Expense = $3,000 per month
General and administrative salaries for each month-

$General and administrative salaries for each month= Total salary for year 12 monthsGeneral and administrative salaries for each month= $144,000 12 monthsGeneral and administrative salaries for each month=$12,000$

Total General and administrative expenses for each month is calculated as under-

$Total General and administrative expenses= General and administrative salaries+Maintenance Expense Total General and administrative expenses for January=$12,000+$3,000Total General and administrative expenses for January=$15,000 Total General and administrative expenses for February=$12,000+$3,000 Total General and administrative expenses for February=$15,000 Total General and administrative expenses for March=$12,000+$3,000 Total General and administrative expenses for March=$15,000$

Conclusion

Thus, the general and administrative expenses budget is prepared for the month of January, February and March.

Requirement 5-

To determine

To prepare:

Monthly capital expenditures Budget

Requirement 5-

Expert Solution

Answer to Problem 8BPSB

Solution:

ISLE Corporation
Capital Expenditures budget

	January	February	March	Quarter
Purchase of Equipment	72,000	96,000	28,800	196,800
Purchase of Land	0	0	150,000	150,000
Total Capital expenditure	72,000	96,000	178,800	346,800

Explanation of Solution

Given-

Purchase of Equipment in January = $72,000
Purchase of Equipment in February = $96,000
Purchase of Equipment in March = $28,800
Purchase of Land in March = $150,000

$Total capital expenditure in March= Purchase of Equipment+ Purchase of LandTotal capital expenditure in March=$28,800 + $150,000Total capital expenditure in March=$178,800$

Conclusion

Thus, Capital expenditure budget is prepared.

Requirement 6-

To determine

To prepare:

Monthly Cash Budget

Requirement 6-

Expert Solution

Answer to Problem 8BPSB

Solution:

ISLE Corporation
Monthly cash budgets

	January	February	March
Beginning cash balance	36,000	198,000	123,000
Cash receipts:
Cash sales	67,500	90,000	112,500
Collection from -
Beginning accounts receivable	315,000	210,000
Credit sales of January		121,500	81,000
Credit sales of February			162,000
Total cash receipts	382,500	421,500	355,500
Total cash available	418,500	619,500	478,500
Less: Cash disbursements-
Merchandise purchases
Beginning accounts payable	72,000	288,000
January accounts payable		18,000	72,000
February accounts payable			51,000
Selling expenses	61,500	79,500	97,500
General and administrative expenses	15,000	15,000	15,000
Capital Expenditure	72,000	96,000	178,800
Taxes			90,000
Total cash disbursements	220,500	496,500	504,300
Surplus/ ( deficiency) of cash	198,000	123,000	(25,800)
Borrowing / ( Repayment)			61,800
Ending cash balance	198,000	123,000	36,000

Explanation of Solution

Cash sales is calculated as under-

$Cash sales = 25% ×Total sales of the month Cash sales for January=25%×$270,000 Cash sales for January=$67,500 Cash sales for February=25%×$360,000 Cash sales for February=$90,000 Cash sales for March=25%×$450,000Cash sales for March=$112,500$

Beginning accounts receivable-
Given-

January-$315,000
February-$210,000

For the month of February-

$Credit sale receipt in the month of February=60%×January Credit salesCredit sale receipt in the month of February=60%×[Total January sales ×75%]Credit sale receipt in the month of February=60%×[$270,000×75%]Credit sale receipt in the month of February=60%×$202,500Credit sale receipt in the month of February=$121,500$

For the month of March-

$Credit sale receipt ={ 40%×January Credit sales}+{ 60%×February Credit sales} Credit sale receipt ={ 40%×[ Total January sales ×75%]}+{ 60%×[ Total February sales ×75%]} Credit sale receipt ={ 40%×[ $270,000×75%]}+{ 60%×[ $360,000×75%]} Credit sale receipt ={ 40%×$202,500}+{ 60%×$270,000} Credit sale receipt =$81,000+$162,000Credit sale receipt =$243,000$

Beginning accounts payable-
Given-

January-$72,000
February-$288,000

For the month of February-

$Accounts payable=20%×January purchases Accounts payable=20%×$90,000Accounts payable=$18,000$

For the month of March-

$Accounts payable=( 80%×January purchases)+( 20%×February purchases)Accounts payable=( 80%×$90,000)+( 20%×$255,000)Accounts payable=$72,000+$51,000Accounts payable=$123,000$

Requirement 7-

To determine

To prepare:

Budgeted income statement

Requirement 7-

Expert Solution

Answer to Problem 8BPSB

Solution:

ISLE Corporation
Income Statement

Particulars	Amount ($)	Amount ($)
Sales		1,080,000
Cost of merchandise sold		720,000
Gross Profit		360,000
Operating expenses:
Selling expenses	238,500
General and administrative expenses	45,000
Depreciation expense	21,425	304,925
Income before tax		55,075
Tax @ 40%		22,030
Net operating income		33,045

Explanation of Solution

Income before tax-

$Income before tax= Sales−Cost of goods sold−Selling Expense −General and administrative expenses− Depreciation expenseIncome before tax=$1,080,000−$720,000−$238,500−$45,000−$21,425Income before tax=$55,075$

Tax Expense-

$Tax Expense=Income before tax×Tax RateTax Expense=$55,075×40%Tax Expense=22,030$

Net Operating income is calculated as under-

$Net Operating income= Income before tax−Tax ExpenseNet Operating income=$55,075−$22,030Net Operating income=33,045$

Conclusion

Thus, Income statement is prepared for the quarter.

Requirement 8-

To determine

To prepare:

Budgeted Balance sheet.

Requirement 8-

Expert Solution

Answer to Problem 8BPSB

Solution:

ISLE Corporation
Balance sheet as of March 31, 2016

	Amount ($)	Amount ($)
Assets
Cash	36,000
Accounts receivable	445,500
Inventory	67,500
Total current assets		549,000
Land		150,000
Equipment gross	736,800
Accumulated depreciation	(88,925)
Equipment net		647,875
Total assets		1,346,875
Stockholder's Equity and Liabilities
Accounts payable	496,500
Bank loan payable	76,800
Tax payable	22,030
Current liabilities		595,330
Common stock		472,500
Retained earnings		279,045
Total Stockholder's Equity and Liabilities		1,346,875