Use the Following Information to Prepare a Budgeted Income Statement

question 28

Essay

Use the following information to prepare a budgeted income statement for Stellar Company for the month of June.
a.Beginning cash balance on June 1 is $52,000.
b.Sales amounts are: April (actual),$1,450,000,May (actual),$1,600,000,and June (budgeted),$1,700,000.
c.Cost of goods sold is 53% of sales.
d.Budgeted cash payments for salaries in June: $260,000.Salaries payable on May 31 are $60,000 and are expected to be $50,000 on June 30.
e.Budgeted depreciation expense for June: $24,000.
f.Other cash expenses budgeted for June: $282,000.
g.Accrued income taxes due in June: $48,000.
h.Bank loan interest due in June: $8,000 which represents the 1% monthly expense on a bank loan of $800,000.
i.The income tax rate applicable to the company is 30%.

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Definitions:

Trade or Business

This refers to the regular and continuous operation of an activity with the purpose of earning income or profit.

Depreciation

An accounting method of allocating the cost of a tangible or physical asset over its useful life to account for declines in value.

Ordinary Assets

Assets that are held for sale in the ordinary course of a business or are otherwise not capital assets, including inventory and property used in a trade or business.

Inventory

Goods and materials held by a business for the purpose of sale or production.