Reference no: EM13513361

A budget is being prepared for the first and second quarters of 19B for Aggarwal Retail Stores, Inc. The balance sheet as of December 31, 19A, is given below.

AGGARWAL RETAIL STORES, INC.

Balance Sheet

December 31, 19A

ASSETS

Cash	$ 65,000
Accounts Receivable	52,000
Merchandise Inventory	75,000
Total Assets	$192,000

 

LIABILITIES AND EQUITIES

Accounts Payable	$ 83,000
Income Tax Payable	20,000
Capital Stock	70,000
Retained Earnings	19,000
Total Liabilities and Equities	$192,000

Actual and projected sales are:

19A 3d quarter (actual)	$250,000
19A 4th quarter (actual)	300,000
19B 1st quarter (estimated)	200,000
19B 2d quarter (estimated)	230,000
19B 3d quarter (estimated)	220,000

Experience has shown that 60 percent of sales will be collected during the quarter of sales and 35 percent of sales will be collected in the following quarter. Gross profit averages 30 percent of sales. There is a basic inventory of $20,000. The policy is to purchase additional inventory each quarter in the amount necessary to provide for the following quarter's sales. Assume that payments are made in the quarter following the quarter of purchase. Selling and administrative expenses for each quarter are estimated at 4 percent of sales plus $15,000. They are paid as incurred. Income tax is equal to 40 percent of taxable income. The income taxliability as of December 31, 19A, is  to be paid during the first quarter of 19B. Prepare a budgeted income statement for the first and second quarters of 19B and a budgeted  balance sheet as of June 30, 19B.