Budgeted Income Statement : It is the statement which presents the budgeted sales and expenses of an entity of a particular period. It is an estimated income statement of future period. To Prepare: Budgeted Income Statement and Budgeted balance sheet .

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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 7, Problem 26E

To determine

Budgeted Income Statement:

It is the statement which presents the budgeted sales and expenses of an entity of a particular period. It is an estimated income statement of future period.

To Prepare: Budgeted Income Statement and Budgeted balance sheet.

Expert Solution & Answer

Explanation of Solution

Company A
Budgeted Income Statement
Particulars	July Amount ($)
Sales (Given)	1,400,000
Less: Cost of goods sold (working note 1)	770,000
Gross profit $[ A ]$	630,000
Less: Expenses:
Salaries (working note 2)	285,000
Depreciation (Given)	36,000
Other expenses (Given)	200,000
Interest on loan (Given)	6,600
Total expenses $[ B ]$	527,600
Income before taxes	102,400
Less: Income tax@30% (Working Note 3)	30,720
Net income after taxes	71,680
Table (1)

Working Note 1:

Formula to calculate cost of goods sold,

$Cost of goods sold=Sales×55%$

Sale is $1,400,000(given).

Substitute $1,400,000 for sales,

$Cost of goods sold=$1,400,000×55% =$770,000$

Working Note 2:

Calculation of salaries,

Given,
Cash paid for salaries is $275,000.
Salary of June is $50,000.
Salary of July is $60,000.

$Salaries for July=( Salaries paid+closing balance of salary −opening balance of salary ) =$275,000+$60,000−$50,000 =$285,000$

Working Note 3:

Calculation of income tax,

Given,
Income before tax is $102,400.
Rate of income tax is 30%.

$Income tax=Net income before taxes×rate of tax =$102,400×30%. =$30,720$

Company A
Balance sheet for the month ended 31^s^t July
Particulars	Amount ($)	Amount ($)
Assets:
Cash (working note 4)	122,400
Account receivable (working note 5)	1,220,000
Merchandise inventory (given)	60,000
Total current assets		1,402,000
Equipment (given)	1,600,000
Less: Accumulated depreciation	316,000	1,284,000
Total Assets		2,686,400
Liabilities and Equities:
Account payable (working note 8)	300,000
Salaries payable (given)	60,000
Income tax payable (Working Note 3)	30,720
Total Current liabilities		390,720
Bank loan (given)		660,000
Total liabilities		1,050,720
Common stock (given)	600,000
Retained earnings (working note 9)	1,035,680
Total stakeholder’s equity		1,635,680
Total Liabilities and Equities		2,686,400
Table (2)

Working Note 4:

Company A
Cash
Particulars	July Amount ($)
Beginning cash balance	50,000
Add: Cash receipts (working note 7)	1,364,000
Total cash available $[ A ]$	1,414,000
Less: Cash disbursement
Payments for purchases (working note 6)	730,000
Salaries	275,000
Other expense	200,000
Accrued taxes	80,000
Interest on loan	6,600
Total Cash disbursement $[ B ]$	1,291,600
Ending cash balance $[ A−B ]$	122,400
Table (3)

Working Note 5:

Calculation of account receivables,

$Account receivable=( Previous month sale×20% )+( Current month sale ×70% ) =( $1,200,000×20% )+( $1,400,000×70% ) =$240,000+$980,000 =$1,220,000$

Working Note 6:

Payments for purchases
Particulars	July Amount ($)
June purchases $( 700,000×40% )$	280,000
July purchases $( 750,000×60% )$	450,000
Total	730,000
Table (4)

Working Note 7:

Cash receipts from sales
Particulars	July Amount ($)
May sales $( 1,720,000×20% )$	344,000
June sales $( 1,200,000×50% )$	600,000
July sales $( 1,400,000×30% )$	420,000
Total	1,364,000
Table (5)

Working Note 8:

Calculation of account payables,

$Account payable=Current month purchase×40% =$750,000×40% =$300,000$

Working Note 9:

Company A
Retained earnings
Particulars	July Amount ($)
Beginning retained earnings (Given)	964,000
Add: Net income	71,680
Ending retained earnings	1,035,680
Table (6)

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Students have asked these similar questions

Do fast answer general accounting question

Consider the following information for Trent Company: Net cash provided by operating activities $1,000,000 Common stock issued as a result of a stock dividend (fair value) 100,000 Common stock issued for cash 400,000 Proceeds from sale of building 300,000 Trent Company should report a net increase in cash of:

Please explain the solution to this general accounting problem with accurate principles.

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 7, Problem 26E

To determine

Budgeted Income Statement:

It is the statement which presents the budgeted sales and expenses of an entity of a particular period. It is an estimated income statement of future period.

To Prepare: Budgeted Income Statement and Budgeted balance sheet.

Expert Solution & Answer

Explanation of Solution

Company A
Budgeted Income Statement
Particulars	July Amount ($)
Sales (Given)	1,400,000
Less: Cost of goods sold (working note 1)	770,000
Gross profit $[ A ]$	630,000
Less: Expenses:
Salaries (working note 2)	285,000
Depreciation (Given)	36,000
Other expenses (Given)	200,000
Interest on loan (Given)	6,600
Total expenses $[ B ]$	527,600
Income before taxes	102,400
Less: Income tax@30% (Working Note 3)	30,720
Net income after taxes	71,680
Table (1)

Working Note 1:

Formula to calculate cost of goods sold,

$Cost of goods sold=Sales×55%$

Sale is $1,400,000(given).

Substitute $1,400,000 for sales,

$Cost of goods sold=$1,400,000×55% =$770,000$

Working Note 2:

Calculation of salaries,

Given,
Cash paid for salaries is $275,000.
Salary of June is $50,000.
Salary of July is $60,000.

$Salaries for July=( Salaries paid+closing balance of salary −opening balance of salary ) =$275,000+$60,000−$50,000 =$285,000$

Working Note 3:

Calculation of income tax,

Given,
Income before tax is $102,400.
Rate of income tax is 30%.

$Income tax=Net income before taxes×rate of tax =$102,400×30%. =$30,720$

Company A
Balance sheet for the month ended 31^s^t July
Particulars	Amount ($)	Amount ($)
Assets:
Cash (working note 4)	122,400
Account receivable (working note 5)	1,220,000
Merchandise inventory (given)	60,000
Total current assets		1,402,000
Equipment (given)	1,600,000
Less: Accumulated depreciation	316,000	1,284,000
Total Assets		2,686,400
Liabilities and Equities:
Account payable (working note 8)	300,000
Salaries payable (given)	60,000
Income tax payable (Working Note 3)	30,720
Total Current liabilities		390,720
Bank loan (given)		660,000
Total liabilities		1,050,720
Common stock (given)	600,000
Retained earnings (working note 9)	1,035,680
Total stakeholder’s equity		1,635,680
Total Liabilities and Equities		2,686,400
Table (2)

Working Note 4:

Company A
Cash
Particulars	July Amount ($)
Beginning cash balance	50,000
Add: Cash receipts (working note 7)	1,364,000
Total cash available $[ A ]$	1,414,000
Less: Cash disbursement
Payments for purchases (working note 6)	730,000
Salaries	275,000
Other expense	200,000
Accrued taxes	80,000
Interest on loan	6,600
Total Cash disbursement $[ B ]$	1,291,600
Ending cash balance $[ A−B ]$	122,400
Table (3)

Working Note 5:

Calculation of account receivables,

$Account receivable=( Previous month sale×20% )+( Current month sale ×70% ) =( $1,200,000×20% )+( $1,400,000×70% ) =$240,000+$980,000 =$1,220,000$

Working Note 6:

Payments for purchases
Particulars	July Amount ($)
June purchases $( 700,000×40% )$	280,000
July purchases $( 750,000×60% )$	450,000
Total	730,000
Table (4)

Working Note 7:

Cash receipts from sales
Particulars	July Amount ($)
May sales $( 1,720,000×20% )$	344,000
June sales $( 1,200,000×50% )$	600,000
July sales $( 1,400,000×30% )$	420,000
Total	1,364,000
Table (5)

Working Note 8:

Calculation of account payables,

$Account payable=Current month purchase×40% =$750,000×40% =$300,000$

Working Note 9:

Company A
Retained earnings
Particulars	July Amount ($)
Beginning retained earnings (Given)	964,000
Add: Net income	71,680
Ending retained earnings	1,035,680
Table (6)

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Answer 3

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 7, Problem 26E

To determine

Budgeted Income Statement:

It is the statement which presents the budgeted sales and expenses of an entity of a particular period. It is an estimated income statement of future period.

To Prepare: Budgeted Income Statement and Budgeted balance sheet.

Expert Solution & Answer

Explanation of Solution

Company A
Budgeted Income Statement
Particulars	July Amount ($)
Sales (Given)	1,400,000
Less: Cost of goods sold (working note 1)	770,000
Gross profit $[ A ]$	630,000
Less: Expenses:
Salaries (working note 2)	285,000
Depreciation (Given)	36,000
Other expenses (Given)	200,000
Interest on loan (Given)	6,600
Total expenses $[ B ]$	527,600
Income before taxes	102,400
Less: Income tax@30% (Working Note 3)	30,720
Net income after taxes	71,680
Table (1)

Working Note 1:

Formula to calculate cost of goods sold,

$Cost of goods sold=Sales×55%$

Sale is $1,400,000(given).

Substitute $1,400,000 for sales,

$Cost of goods sold=$1,400,000×55% =$770,000$

Working Note 2:

Calculation of salaries,

Given,
Cash paid for salaries is $275,000.
Salary of June is $50,000.
Salary of July is $60,000.

$Salaries for July=( Salaries paid+closing balance of salary −opening balance of salary ) =$275,000+$60,000−$50,000 =$285,000$

Working Note 3:

Calculation of income tax,

Given,
Income before tax is $102,400.
Rate of income tax is 30%.

$Income tax=Net income before taxes×rate of tax =$102,400×30%. =$30,720$

Company A
Balance sheet for the month ended 31^s^t July
Particulars	Amount ($)	Amount ($)
Assets:
Cash (working note 4)	122,400
Account receivable (working note 5)	1,220,000
Merchandise inventory (given)	60,000
Total current assets		1,402,000
Equipment (given)	1,600,000
Less: Accumulated depreciation	316,000	1,284,000
Total Assets		2,686,400
Liabilities and Equities:
Account payable (working note 8)	300,000
Salaries payable (given)	60,000
Income tax payable (Working Note 3)	30,720
Total Current liabilities		390,720
Bank loan (given)		660,000
Total liabilities		1,050,720
Common stock (given)	600,000
Retained earnings (working note 9)	1,035,680
Total stakeholder’s equity		1,635,680
Total Liabilities and Equities		2,686,400
Table (2)

Working Note 4:

Company A
Cash
Particulars	July Amount ($)
Beginning cash balance	50,000
Add: Cash receipts (working note 7)	1,364,000
Total cash available $[ A ]$	1,414,000
Less: Cash disbursement
Payments for purchases (working note 6)	730,000
Salaries	275,000
Other expense	200,000
Accrued taxes	80,000
Interest on loan	6,600
Total Cash disbursement $[ B ]$	1,291,600
Ending cash balance $[ A−B ]$	122,400
Table (3)

Working Note 5:

Calculation of account receivables,

$Account receivable=( Previous month sale×20% )+( Current month sale ×70% ) =( $1,200,000×20% )+( $1,400,000×70% ) =$240,000+$980,000 =$1,220,000$

Working Note 6:

Payments for purchases
Particulars	July Amount ($)
June purchases $( 700,000×40% )$	280,000
July purchases $( 750,000×60% )$	450,000
Total	730,000
Table (4)

Working Note 7:

Cash receipts from sales
Particulars	July Amount ($)
May sales $( 1,720,000×20% )$	344,000
June sales $( 1,200,000×50% )$	600,000
July sales $( 1,400,000×30% )$	420,000
Total	1,364,000
Table (5)

Working Note 8:

Calculation of account payables,

$Account payable=Current month purchase×40% =$750,000×40% =$300,000$

Working Note 9:

Company A
Retained earnings
Particulars	July Amount ($)
Beginning retained earnings (Given)	964,000
Add: Net income	71,680
Ending retained earnings	1,035,680
Table (6)

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Answer 4

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 7, Problem 26E

To determine

Budgeted Income Statement:

It is the statement which presents the budgeted sales and expenses of an entity of a particular period. It is an estimated income statement of future period.

To Prepare: Budgeted Income Statement and Budgeted balance sheet.

Expert Solution & Answer

Explanation of Solution

Company A
Budgeted Income Statement
Particulars	July Amount ($)
Sales (Given)	1,400,000
Less: Cost of goods sold (working note 1)	770,000
Gross profit $[ A ]$	630,000
Less: Expenses:
Salaries (working note 2)	285,000
Depreciation (Given)	36,000
Other expenses (Given)	200,000
Interest on loan (Given)	6,600
Total expenses $[ B ]$	527,600
Income before taxes	102,400
Less: Income tax@30% (Working Note 3)	30,720
Net income after taxes	71,680
Table (1)

Working Note 1:

Formula to calculate cost of goods sold,

$Cost of goods sold=Sales×55%$

Sale is $1,400,000(given).

Substitute $1,400,000 for sales,

$Cost of goods sold=$1,400,000×55% =$770,000$

Working Note 2:

Calculation of salaries,

Given,
Cash paid for salaries is $275,000.
Salary of June is $50,000.
Salary of July is $60,000.

$Salaries for July=( Salaries paid+closing balance of salary −opening balance of salary ) =$275,000+$60,000−$50,000 =$285,000$

Working Note 3:

Calculation of income tax,

Given,
Income before tax is $102,400.
Rate of income tax is 30%.

$Income tax=Net income before taxes×rate of tax =$102,400×30%. =$30,720$

Company A
Balance sheet for the month ended 31^s^t July
Particulars	Amount ($)	Amount ($)
Assets:
Cash (working note 4)	122,400
Account receivable (working note 5)	1,220,000
Merchandise inventory (given)	60,000
Total current assets		1,402,000
Equipment (given)	1,600,000
Less: Accumulated depreciation	316,000	1,284,000
Total Assets		2,686,400
Liabilities and Equities:
Account payable (working note 8)	300,000
Salaries payable (given)	60,000
Income tax payable (Working Note 3)	30,720
Total Current liabilities		390,720
Bank loan (given)		660,000
Total liabilities		1,050,720
Common stock (given)	600,000
Retained earnings (working note 9)	1,035,680
Total stakeholder’s equity		1,635,680
Total Liabilities and Equities		2,686,400
Table (2)

Working Note 4:

Company A
Cash
Particulars	July Amount ($)
Beginning cash balance	50,000
Add: Cash receipts (working note 7)	1,364,000
Total cash available $[ A ]$	1,414,000
Less: Cash disbursement
Payments for purchases (working note 6)	730,000
Salaries	275,000
Other expense	200,000
Accrued taxes	80,000
Interest on loan	6,600
Total Cash disbursement $[ B ]$	1,291,600
Ending cash balance $[ A−B ]$	122,400
Table (3)

Working Note 5:

Calculation of account receivables,

$Account receivable=( Previous month sale×20% )+( Current month sale ×70% ) =( $1,200,000×20% )+( $1,400,000×70% ) =$240,000+$980,000 =$1,220,000$

Working Note 6:

Payments for purchases
Particulars	July Amount ($)
June purchases $( 700,000×40% )$	280,000
July purchases $( 750,000×60% )$	450,000
Total	730,000
Table (4)

Working Note 7:

Cash receipts from sales
Particulars	July Amount ($)
May sales $( 1,720,000×20% )$	344,000
June sales $( 1,200,000×50% )$	600,000
July sales $( 1,400,000×30% )$	420,000
Total	1,364,000
Table (5)

Working Note 8:

Calculation of account payables,

$Account payable=Current month purchase×40% =$750,000×40% =$300,000$

Working Note 9:

Company A
Retained earnings
Particulars	July Amount ($)
Beginning retained earnings (Given)	964,000
Add: Net income	71,680
Ending retained earnings	1,035,680
Table (6)

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Answer 5

Chapter 7, Problem 26E

To determine

Budgeted Income Statement:

It is the statement which presents the budgeted sales and expenses of an entity of a particular period. It is an estimated income statement of future period.

To Prepare: Budgeted Income Statement and Budgeted balance sheet.

Expert Solution & Answer

Explanation of Solution

Company A
Budgeted Income Statement
Particulars	July Amount ($)
Sales (Given)	1,400,000
Less: Cost of goods sold (working note 1)	770,000
Gross profit $[ A ]$	630,000
Less: Expenses:
Salaries (working note 2)	285,000
Depreciation (Given)	36,000
Other expenses (Given)	200,000
Interest on loan (Given)	6,600
Total expenses $[ B ]$	527,600
Income before taxes	102,400
Less: Income tax@30% (Working Note 3)	30,720
Net income after taxes	71,680
Table (1)

Working Note 1:

Formula to calculate cost of goods sold,

$Cost of goods sold=Sales×55%$

Sale is $1,400,000(given).

Substitute $1,400,000 for sales,

$Cost of goods sold=$1,400,000×55% =$770,000$

Working Note 2:

Calculation of salaries,

Given,
Cash paid for salaries is $275,000.
Salary of June is $50,000.
Salary of July is $60,000.

$Salaries for July=( Salaries paid+closing balance of salary −opening balance of salary ) =$275,000+$60,000−$50,000 =$285,000$

Working Note 3:

Calculation of income tax,

Given,
Income before tax is $102,400.
Rate of income tax is 30%.

$Income tax=Net income before taxes×rate of tax =$102,400×30%. =$30,720$

Company A
Balance sheet for the month ended 31^s^t July
Particulars	Amount ($)	Amount ($)
Assets:
Cash (working note 4)	122,400
Account receivable (working note 5)	1,220,000
Merchandise inventory (given)	60,000
Total current assets		1,402,000
Equipment (given)	1,600,000
Less: Accumulated depreciation	316,000	1,284,000
Total Assets		2,686,400
Liabilities and Equities:
Account payable (working note 8)	300,000
Salaries payable (given)	60,000
Income tax payable (Working Note 3)	30,720
Total Current liabilities		390,720
Bank loan (given)		660,000
Total liabilities		1,050,720
Common stock (given)	600,000
Retained earnings (working note 9)	1,035,680
Total stakeholder’s equity		1,635,680
Total Liabilities and Equities		2,686,400
Table (2)

Working Note 4:

Company A
Cash
Particulars	July Amount ($)
Beginning cash balance	50,000
Add: Cash receipts (working note 7)	1,364,000
Total cash available $[ A ]$	1,414,000
Less: Cash disbursement
Payments for purchases (working note 6)	730,000
Salaries	275,000
Other expense	200,000
Accrued taxes	80,000
Interest on loan	6,600
Total Cash disbursement $[ B ]$	1,291,600
Ending cash balance $[ A−B ]$	122,400
Table (3)

Working Note 5:

Calculation of account receivables,

$Account receivable=( Previous month sale×20% )+( Current month sale ×70% ) =( $1,200,000×20% )+( $1,400,000×70% ) =$240,000+$980,000 =$1,220,000$

Working Note 6:

Payments for purchases
Particulars	July Amount ($)
June purchases $( 700,000×40% )$	280,000
July purchases $( 750,000×60% )$	450,000
Total	730,000
Table (4)

Working Note 7:

Cash receipts from sales
Particulars	July Amount ($)
May sales $( 1,720,000×20% )$	344,000
June sales $( 1,200,000×50% )$	600,000
July sales $( 1,400,000×30% )$	420,000
Total	1,364,000
Table (5)

Working Note 8:

Calculation of account payables,

$Account payable=Current month purchase×40% =$750,000×40% =$300,000$

Working Note 9:

Company A
Retained earnings
Particulars	July Amount ($)
Beginning retained earnings (Given)	964,000
Add: Net income	71,680
Ending retained earnings	1,035,680
Table (6)

Answer 6

Chapter 7, Problem 26E

To determine

Budgeted Income Statement:

It is the statement which presents the budgeted sales and expenses of an entity of a particular period. It is an estimated income statement of future period.

To Prepare: Budgeted Income Statement and Budgeted balance sheet.

Expert Solution & Answer

Explanation of Solution

Company A
Budgeted Income Statement
Particulars	July Amount ($)
Sales (Given)	1,400,000
Less: Cost of goods sold (working note 1)	770,000
Gross profit $[ A ]$	630,000
Less: Expenses:
Salaries (working note 2)	285,000
Depreciation (Given)	36,000
Other expenses (Given)	200,000
Interest on loan (Given)	6,600
Total expenses $[ B ]$	527,600
Income before taxes	102,400
Less: Income tax@30% (Working Note 3)	30,720
Net income after taxes	71,680
Table (1)

Working Note 1:

Formula to calculate cost of goods sold,

$Cost of goods sold=Sales×55%$

Sale is $1,400,000(given).

Substitute $1,400,000 for sales,

$Cost of goods sold=$1,400,000×55% =$770,000$

Working Note 2:

Calculation of salaries,

Given,
Cash paid for salaries is $275,000.
Salary of June is $50,000.
Salary of July is $60,000.

$Salaries for July=( Salaries paid+closing balance of salary −opening balance of salary ) =$275,000+$60,000−$50,000 =$285,000$

Working Note 3:

Calculation of income tax,

Given,
Income before tax is $102,400.
Rate of income tax is 30%.

$Income tax=Net income before taxes×rate of tax =$102,400×30%. =$30,720$

Company A
Balance sheet for the month ended 31^s^t July
Particulars	Amount ($)	Amount ($)
Assets:
Cash (working note 4)	122,400
Account receivable (working note 5)	1,220,000
Merchandise inventory (given)	60,000
Total current assets		1,402,000
Equipment (given)	1,600,000
Less: Accumulated depreciation	316,000	1,284,000
Total Assets		2,686,400
Liabilities and Equities:
Account payable (working note 8)	300,000
Salaries payable (given)	60,000
Income tax payable (Working Note 3)	30,720
Total Current liabilities		390,720
Bank loan (given)		660,000
Total liabilities		1,050,720
Common stock (given)	600,000
Retained earnings (working note 9)	1,035,680
Total stakeholder’s equity		1,635,680
Total Liabilities and Equities		2,686,400
Table (2)

Working Note 4:

Company A
Cash
Particulars	July Amount ($)
Beginning cash balance	50,000
Add: Cash receipts (working note 7)	1,364,000
Total cash available $[ A ]$	1,414,000
Less: Cash disbursement
Payments for purchases (working note 6)	730,000
Salaries	275,000
Other expense	200,000
Accrued taxes	80,000
Interest on loan	6,600
Total Cash disbursement $[ B ]$	1,291,600
Ending cash balance $[ A−B ]$	122,400
Table (3)

Working Note 5:

Calculation of account receivables,

$Account receivable=( Previous month sale×20% )+( Current month sale ×70% ) =( $1,200,000×20% )+( $1,400,000×70% ) =$240,000+$980,000 =$1,220,000$

Working Note 6:

Payments for purchases
Particulars	July Amount ($)
June purchases $( 700,000×40% )$	280,000
July purchases $( 750,000×60% )$	450,000
Total	730,000
Table (4)

Working Note 7:

Cash receipts from sales
Particulars	July Amount ($)
May sales $( 1,720,000×20% )$	344,000
June sales $( 1,200,000×50% )$	600,000
July sales $( 1,400,000×30% )$	420,000
Total	1,364,000
Table (5)

Working Note 8:

Calculation of account payables,

$Account payable=Current month purchase×40% =$750,000×40% =$300,000$

Working Note 9:

Company A
Retained earnings
Particulars	July Amount ($)
Beginning retained earnings (Given)	964,000
Add: Net income	71,680
Ending retained earnings	1,035,680
Table (6)

Answer 7

Chapter 7, Problem 26E

To determine

Budgeted Income Statement:

It is the statement which presents the budgeted sales and expenses of an entity of a particular period. It is an estimated income statement of future period.

To Prepare: Budgeted Income Statement and Budgeted balance sheet.

Answer 8

Expert Solution & Answer

Explanation of Solution

Company A
Budgeted Income Statement
Particulars	July Amount ($)
Sales (Given)	1,400,000
Less: Cost of goods sold (working note 1)	770,000
Gross profit $[ A ]$	630,000
Less: Expenses:
Salaries (working note 2)	285,000
Depreciation (Given)	36,000
Other expenses (Given)	200,000
Interest on loan (Given)	6,600
Total expenses $[ B ]$	527,600
Income before taxes	102,400
Less: Income tax@30% (Working Note 3)	30,720
Net income after taxes	71,680
Table (1)

Working Note 1:

Formula to calculate cost of goods sold,

$Cost of goods sold=Sales×55%$

Sale is $1,400,000(given).

Substitute $1,400,000 for sales,

$Cost of goods sold=$1,400,000×55% =$770,000$

Working Note 2:

Calculation of salaries,

Given,
Cash paid for salaries is $275,000.
Salary of June is $50,000.
Salary of July is $60,000.

$Salaries for July=( Salaries paid+closing balance of salary −opening balance of salary ) =$275,000+$60,000−$50,000 =$285,000$

Working Note 3:

Calculation of income tax,

Given,
Income before tax is $102,400.
Rate of income tax is 30%.

$Income tax=Net income before taxes×rate of tax =$102,400×30%. =$30,720$

Company A
Balance sheet for the month ended 31^s^t July
Particulars	Amount ($)	Amount ($)
Assets:
Cash (working note 4)	122,400
Account receivable (working note 5)	1,220,000
Merchandise inventory (given)	60,000
Total current assets		1,402,000
Equipment (given)	1,600,000
Less: Accumulated depreciation	316,000	1,284,000
Total Assets		2,686,400
Liabilities and Equities:
Account payable (working note 8)	300,000
Salaries payable (given)	60,000
Income tax payable (Working Note 3)	30,720
Total Current liabilities		390,720
Bank loan (given)		660,000
Total liabilities		1,050,720
Common stock (given)	600,000
Retained earnings (working note 9)	1,035,680
Total stakeholder’s equity		1,635,680
Total Liabilities and Equities		2,686,400
Table (2)

Working Note 4:

Company A
Cash
Particulars	July Amount ($)
Beginning cash balance	50,000
Add: Cash receipts (working note 7)	1,364,000
Total cash available $[ A ]$	1,414,000
Less: Cash disbursement
Payments for purchases (working note 6)	730,000
Salaries	275,000
Other expense	200,000
Accrued taxes	80,000
Interest on loan	6,600
Total Cash disbursement $[ B ]$	1,291,600
Ending cash balance $[ A−B ]$	122,400
Table (3)

Working Note 5:

Calculation of account receivables,

$Account receivable=( Previous month sale×20% )+( Current month sale ×70% ) =( $1,200,000×20% )+( $1,400,000×70% ) =$240,000+$980,000 =$1,220,000$

Working Note 6:

Payments for purchases
Particulars	July Amount ($)
June purchases $( 700,000×40% )$	280,000
July purchases $( 750,000×60% )$	450,000
Total	730,000
Table (4)

Working Note 7:

Cash receipts from sales
Particulars	July Amount ($)
May sales $( 1,720,000×20% )$	344,000
June sales $( 1,200,000×50% )$	600,000
July sales $( 1,400,000×30% )$	420,000
Total	1,364,000
Table (5)

Working Note 8:

Calculation of account payables,

$Account payable=Current month purchase×40% =$750,000×40% =$300,000$

Working Note 9:

Company A
Retained earnings
Particulars	July Amount ($)
Beginning retained earnings (Given)	964,000
Add: Net income	71,680
Ending retained earnings	1,035,680
Table (6)

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 7 - Prob. 1MCQ Ch. 7 - Prob. 2MCQ Ch. 7 - Prob. 3MCQ Ch. 7 - Prob. 4MCQ Ch. 7 - Prob. 5MCQ Ch. 7 - Identify at least three benefits of budgeting in...Ch. 7 - Prob. 2DQ Ch. 7 - What is the benefit of continuous budgeting?Ch. 7 - Identify three usual time horizons for short-term...Ch. 7 - Why should each department participate in...

Budgeted Income Statement : It is the statement which presents the budgeted sales and expenses of an entity of a particular period. It is an estimated income statement of future period. To Prepare: Budgeted Income Statement and Budgeted balance sheet .

Concept explainers

Budgeted Income Statement:

It is the statement which presents the budgeted sales and expenses of an entity of a particular period. It is an estimated income statement of future period.

To Prepare: Budgeted Income Statement and Budgeted balance sheet.

Explanation of Solution

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Chapter 7 Solutions

Budgeted Income Statement : It is the statement which presents the budgeted sales and expenses of an entity of a particular period. It is an estimated income statement of future period. To Prepare: Budgeted Income Statement and Budgeted balance sheet .

Concept explainers

Budgeted Income Statement: It is the statement which presents the budgeted sales and expenses of an entity of a particular period. It is an estimated income statement of future period. To Prepare: Budgeted Income Statement and Budgeted balance sheet.

Explanation of Solution

Want to see more full solutions like this?

Chapter 7 Solutions

Budgeted Income Statement:

It is the statement which presents the budgeted sales and expenses of an entity of a particular period. It is an estimated income statement of future period.

To Prepare: Budgeted Income Statement and Budgeted balance sheet.