Question

Use the information in Exercise 20-25 and the following additional information to prepare a budgeted income statement for the month of July and a budgeted balance sheet for July 31.

a. Cost of goods sold is 55% of sales.

b. Inventory at the end of June is \(80,000 and at the end of July is \)60,000.

c. Salaries payable on June 30 are \(50,000 and are expected to be \)60,000 on July 31.

d. The equipment account balance is \(1,600,000 on July 31. On June 30, the accumulated depreciation on equipment is \)280,000.

e. The \(6,600 cash payment of interest represents the 1% monthly expense on a bank loan of \)660,000.

f. Income taxes payable on July 31 are \(30,720, and the income tax rate is 30%.

g. The only other balance sheet accounts are: Common Stock, with a balance of \)600,000 on June 30; and Retained Earnings, with a balance of $964,000 on June 30.

Short answer

The budgeted income statement and the budgeted balance sheetfor Acco Company will be made afteradjusting the balances of additional information.

Step-by-step solution

Budgeted income statement

Acco Company
Budgeted income statement
For the month of July
Particulars		Amount
Sales		$1,400,000
Cost of goods sold		$770,000
Gross profit		$630,000
Operating expenses:
Salaries	$285,000
Depreciation	$36,000
Other cash expenses	$200,000
Bank loan interest	$6,600
Total operating expenses		$527,600
Income before income taxes		$102,400
Income tax expense		$30,720
Net Income		$71,680

Budgeted balance sheet

Acco Company
Budgeted balance sheet
For the month of July
Assets		Amount
Cash	$122,400
Accounts receivables	$1,220,000
Inventory	$60,000
Total current assets		$1,402,000
Equipment	$1,600,000
Accumulated depreciation	$316,000
Net equipment		$1,284,000
Total assets		$2,686,400
Liabilities and Equity		Amount
Liabilities
Accounts payable	$300,000
Salaries payable	$60,000
Income taxes payable	$30,720
Total current liabilities		$390,720
Bank loan payable		$660,000
Total liabilities		$1,050,720
Stockholder’s Equity
Common stock	$600,000
Retained earnings	$1,035,680
Total stockholder’s equity		$1,635,680
Total liabilities and equity		$2,686,400