Question

The following information is available for Zetrov Company: a. The cash budget for March shows an ending bank loan of \(10,000 and an ending cash balance of \)50,000. b. The sales budget for March indicates sales of \(140,000. Accounts receivable are expected to be 70% of the current-month sales. c. The merchandise purchases budget indicates that \)89,000 in merchandise will be purchased on account in March. Purchases on account are paid 100% in the month following the purchase. Ending inventory for March is predicted to be 600 units at a cost of \(35 each. d. The budgeted income statement for March shows net income of \)48,000. Depreciation expense of \(1,000 and \)26,000 in income tax expense were used in computing net income for March. Accrued taxes will be paid in April. e. The balance sheet for February shows equipment of \(84,000 with accumulated depreciation of \)46,000, common stock of \(25,000, and ending retained earnings of \)8,000. There are no changes budgeted in the Equipment or Common Stock accounts. Prepare a budgeted balance sheet at the end of March.

Short answer

Retained earnings is a term used when an organizationretains a certain portion of funds out of total profitto meet future contingency.

Step-by-step solution

Budgeted balance sheet

Zetrov Company

Budgeted balance sheet

As on March 31

Assets		Amount
Cash		$50,000
Accounts receivables		$98,000
Merchandise inventory		$21,000
Total current assets		$169,000
Equipment	$84,000
Less: Accumulated depreciation	$47,000	$37,000
Total assets		$206,000
Liabilities and Equity		Amount
Liabilities
Accounts payable	$89,000
Income taxes payable	$26,000
Bank loan payable	$10,000	$125,000
Stockholder’s equity
Common stock	$25,000
Retained earnings	$56,000	$81,000
Total liabilities and equity		$206,000

Working notes

Particulars	Amount
Accumulated depreciation	$46,000
Add: Depreciation expense	$1,000
Total depreciation	$47,000

Particulars	Amount
Beginning retained earnings	$8,000
Add: Net income	$48,000
Ending retained earnings	$56,000