Reference no: EM133074253

Question - Kristan Division of KML has been requested to prepare a quarterly budgeted income statement for 2021. The regional manager expects that sales in the first quarter of 2021 will increase in volume by 10% over the same quarter of the preceding year and will then increase by 5% for each succeeding quarter in 2021.

The corporate head office has requested that the regional manager maintain an inventory in pesos equal to 16% of the next quarter's sales. Quarterly purchases average 45% of quarterly sales. Budgeted ending inventory on December 31, 2020, is P8,000. Quarterly salaries are P7,200 plus 10% of sales. All salaries are classified as sales salaries. Other quarterly expenses are estimated to be as follows:

Rent expense P4,400

Depreciation on office equipment P2,000

Utilities expense P1,800

Miscellaneous expenses 2% of sales

The income statement information for the first quarter of 2020 was as follows:

Sales P150,000

Cost of goods sold 66,000

The December 31, 2021, balance sheet accounts include the following balances:

Cash 26,000

Marketable Securities 27,894

Equipment 127,000

Accumulated Depreciation 52,000

Common Stock 68,000

Retained Earnings 21,000.

Accounts receivable at December 31, 2021 are expected to be 8% of annual sales.

20% of the ending inventory is expected to have not yet been paid at December 31, 2021

Required - Prepare a budgeted quarterly income statement and balance sheet for the first quarter of 2021.