Please do the Income Statement and the Retained earnings from the balance sheet.
ID: 2578113 • Letter: P
Question
Please do the Income Statement and the Retained earnings from the balance sheet. ThanksABC Company, a retailer, prepares its master budget on a quarterly basis. The following data has been assembled to assist in preparation of the master for the first quarter. a. As of December 31 (the end of the prior quarter), the company's general ledger showed the following account balances. ASSETS LIABILITIES AND EQUITY Cash Accounts Receivable 224,000 Inventory Buildings and Equipment $ 47,000 Accounts Payable Capital Stock Retained Earnings $ 92,000 500,000 109,000 60,000 (net of depreciation)370,000 TOTAL ASSETS $701,000 TOTAL LIABILITIES AND EQUITY $701,000 b. Actual sales for December and budgeted sales for the next four months are as follows: December (actual) January February March April S280,000 500,000 700,000 400,000 300,000 Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following sale. The accounts receivable at December 31 are a result of December credit sales d. The Company's gross profit rate is 40% of sales. e. Monthly expenses are budgeted as follows: salaries and wages, S27,000 per month; advertising, $70,000 per month; shipping, 5% of sales; depreciation, SI 4,000 per month; other expenses, 3% of sales.
Explanation / Answer
5) Income Statement for the quarter ended March 31 (Amounts in $)
Working Notes :
1) Calculation of net income from Retained Earnings (Amount in $)
Sales (500,000+700,000+400,000) 1,600,000 Cost of Goods sold: Beginning inventory 60,000 Add: Purchases (1,005,000-60,000) (calculated reversely by gross profit) 945,000 Goods available for sale (960,000+45,000) 1,005,000 Less: Ending Inventory (given in Balance sheet) (45,000) Cost of goods sold (60% of sales) 960,000 Gross Margin (40% of sales) 640,000 Less: Selling and Administration Expense Salaries and wages (27,000*3) (81,000) Advertising (70,000*3) (210,000) Shipping (5% of 1,600,000) (80,000) Depreciation ($14,000*3) (42,000) Other Expense (3% of 1,600,000) (48,000) Net Operating Income 179,000 Interest expense (179,000-175,820) (Balancing figure) (3,180) Net Income(WN 1) 175,820