Prepare bates and hills pro-forma income statement

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Reference no: EM131439819

Assignment

There are two questions.

Question 1: Show all workings. Could be done in word or excel format.

Question 2: Answer should be in word document format.

QUESTION 1

Bill Thomas, Bates & Hill's controller, has received all the budgets prepared by the various operating units and is ready to compile the pro-forma financial statements for the first quarter. The company's balance sheet as of December 31 is as follows:

Cash..................................................... $ 36,000
Accounts Receivable (net) ........................... 35,100
Finished Goods Inventory ........................... 29,400
Raw Materials Inventory ........................... 4,536
Property, Plant & Equipment ..................... 180,000
Accumulated Depreciation ........................ (45,000)
Total Assets .......................................... $240,036
Accounts Payable ................................... $ 10,800
Income Tax Payable ................................ 45,156
Common Stock ...................................... 60,000
Retained Earnings .................................. 124,080
Total Liabilities & Owners Equity............... $240,036

	Quarter
Budgeted revenue	$846,000
Selling and administrative expense	159,840
Interest expense	2,028
Cash	18,465
Cost of Goods Sold	602,022
Accounts receivable	81,900
Direct materials	3,336
Finished goods	35,409
Acounts payable	19,920
Notes payable	24,600

Additional Information:

? Bates & Hill plans to declare and pay dividends totaling $29,400 in January.
? Bates & Hill plans to purchase and pay cash for a piece of land in February at a cost of $43,200.
? Bates & Hill plans to purchase equipment in March at a cost of $36,000.
? Depreciation for manufacturing overhead $18,000 per month and for selling and administrative $6,000 per month.

The company expects a 18% income tax rate, and all quarterly taxes are paid in the first month of the following quarter.

The company expects a 30% income tax rate, and all quarterly taxes are paid in the first month of the following quarter.

Required

a. Prepare Bates & Hill's pro-forma income statement for the first quarter.
b. Prepare Bates & Hill's pro-forma balance sheet as of March 31.

QUESTION 2

Complete essay in Word document in APA format.

Essay Question 1

Complete the essay questions in one Word document and submit to the Dropbox:

Management by exception focuses only on those variances management considers important. List three factors that managers use in deciding whether or not to investigate a variance and give an example of each.

Essay Question 2

Managers use budgeting to control and evaluate their operations. Two types of budgets that are discussed in chapter 6 are the static budget and the flexible budget. How do the two budgets differ and explain how the flexible budget is used in evaluating performance.

Reference no: EM131439819

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