Chapter 22, Problem P22.40APGA

Preparing a financial budget−budgeted income statement and balance sheet

Learning Objective 4
1. NI $166,100
2. FG inventory $3,150

Bradley Company has the following post-closing trial balance on December 31, 2018:

BRADLEY COMPANY Post-Closing Trial Balance December 31, 2018
Account	Debit	Credit
Cash	$15,000
Accounts Receivable	23,200
Raw Materials Inventory	11,000
Finished Goods Inventory	25,900
Equipment	125,000
Accumulated Depreciation		$35,000
Accounts Payable		13,600
Common Stock		150,000
Retained Earnings		1,500
Totals	$200,100	$200,100

The company’s accounting department has gathered the following budgeting information for the first quarter of 2019:

Budgeted total sales, all on account	$305,000
Budgeted direct materials to be purchased and used	32,000
Budgeted direct labor cost	12,500
Budgeted manufacturing overhead costs:
Variable manufacturing overhead	2,100
Depreciation	1,300
Insurance and property taxes	1,350
Budgeted selling and administrative expenses:
Salaries expense	7,000
Rent expense	2,000
Insurance expense	1,100
Depreciation expense	550
Supplies expense	15,250
Budgeted cash receipts from customers	263,500
Budgeted income tax expense	41,000
Budgeted purchase and payment for capital expenditures (additional equipment)	43,000

Additional information:
a. Direct materials purchases are paid 70% in the quarter purchased and 30% ii the next quarter.
b. Direct labor, manufacturing overhead, selling and administrative costs, and income tax expense are paid in the quarter incurred.
c. Accounts payable at December 31, 2018 are paid in the first quarter of 2019.

Requirements

1. Prepare Bradley Company’s budgeted income statement for the first quarter of 2019.
2. Prepare Bradley Company’s budgeted balance sheet as of March 31, 2019.