Irwin Company has the following post-closing trial balance on December 31, 2016: Irwin Company...

Question:

Irwin Company has the following post-closing trial balance on December 31, 2016:

Irwin Company
Post-Closing Trial Balance
December 31, 2016
Account Debit Credit
Cash $20,000
Accounts receivable 20,300
Raw materials inventory 14,000
Finished goods inventory 25,700
Equipment 110,000
Accumulated depreciation $65,000
Accounts payable 8,000
Common stock 85,000
Retained earnings 32,000
Totals $190,000 $190,000

The company's accounting department has gathered the following budgeting information for the first quarter of 2017:

Budgeted total sales, all on account $310,000
Budgeted direct materials to be purchased and used 35,000
Budgeted direct labor cost 12,500
Budgeted manufacturing costs:
Variable manufacturing overhead 2,200
Depreciation 500
Insurance and property taxes 1,450
Budgeted cost of goods sold 72,000
Budgeted selling and administrative expenses:
Salaries expense 12,000
Rent expense 3,000
Insurance expense 1,000
Depreciation expense 150
Supplies expense 9,300
Budgeted cash receipts from customers 261,500
Budgeted income tax expense 51,000
Budgeted purchase and payment for capital expenditures (additional equipment) 45,000

Additional information:

a. Direct materials purchases are paid 50% in the quarter purchased and 50% in the next quarter.

b. Direct labor, manufacturing overhead, selling and administrative costs, and income tax expense are paid in the quarter incurred.

REQUIREMENTS

1. Prepare Irwin Company's budgeted income statement for the first quarter of 2017.

2. Prepare Irwin Company's budgeted statement of cash flows for the first quarter of 2017.

3. Prepare Irwin Company's budgeted balance sheet of March 31, 2017. Hint use the budgeted statement of cash flows prepared in Requirement 2 to determine the Cash Balance.

Income Statement:

Income Statement, also called as the Statement of Financial Performance, shows the results of the operations during the period covered. this can be computed by deducting costs costs and expenses to the total revenue generated, regardless of these are collected or not.

Answer and Explanation:

1. Prepare Irwin Company's budgeted income statement for the first quarter of 2017.

Budgeted total sales, all on account 310,000
Budgeted cost of goods sold -72,000
Gross Margin 238,00
Salaries expense -12,000
Rent expense -3,000
Insurance expense -1,000
Depreciation expense -150
Supplies expense -9,300
Income Before Taxes 212,550
Budgeted income tax expense -51,000
Net Income 161,550


2. Prepare Irwin Company's budgeted statement of cash flows for the first quarter of 2017.

Cash Receipts 261,500
Payment for Direct Materials -17,500
Payment for Direct Labor -12,500
Payment for Overhead -4,150
Payment for Selling and Administrative Expenses -121,300
Ending Cash Balance 106,050


3. Prepare Irwin Company's budgeted balance sheet of March 31, 2017. Hint use the budgeted statement of cash flows prepared in Requirement 2 to determine the Cash Balance.

Assets
Current Assets
Cash 106,050
Accounts Receivables (20,300+48,500) 68,800
Raw Materials Inventory 14,000
Finished Goods Inventory 25,700
Total Current Assets 214,550
Non Current Assets
Equipment (110,000+45,000) 155,000
Accumulated Depreciation (65,000+500) -65,500
Total Assets 304,050
Liabilities and Equity
Liabilities
Current Liabilities
Accounts Payable (8,000+17,500) 25,500
Total Current Liabilities 25,500
Total Liabilities 25,500
Equity
Common Stock 85,000
Retained Earnings (32,000+161,550) 193,550
Total Equity 278,550
Total Liabilities and Equity 304,050

Learn more about this topic:

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What Is an Income Statement? - Purpose, Components & Format

from Accounting 101: Financial Accounting

Chapter 2 / Lesson 2
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