Aggarwal Retail Stores, Inc. Balance Sheet December 31, 20X1
ASSETS LIABILITIES AND EQUITIES
Cash $ 65,000 Accounts payable $ 83,000
Accounts receivable 52,000 Income tax payable 20,000
Merchandise inventory 75,000 Capital stock 70,000
Retained earnings 19,000
Total assets $192,000 Total liabilities and equities $192,000
Actual and projected sales are:
20X1, 3rd quarter (actual): $250,000
20X1, 4th quarter (actual): $300,000
20X2, 1st quarter (estimated): $200,000
20X2, 2nd quarter (estimated): $230,000
20X2, 3nd quarter (estimated): $220,000
Experience has shown that 60 percent of sales will be collected during the first 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 in each quarter the additional inventory needed for the following quarter’s sales; 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 and are paid as incurred. Income tax is equal to 40 percent of taxable income. The income tax liability as of December 31, 20X1, is to be paid during the first quarter of 20X2.
Prepare (a) a budgeted income statement for the first and second quarter of 20X2 and (b) a budgeted balance sheet as of June 30, 20X2.