The Following Information Is Available for Hammel Company

question 20

Essay

The following information is available for Hammel Company:
a. The Cash Budget for March shows a bank loan of $10,000 and an ending cash balance of $48,000.
b. The Sales Budget for March indicates sales of $120,000. Accounts receivable is expected to be 70% of the current-month sales.
c. The Merchandise Purchases Budget indicates that $90,000 in merchandise will be purchased in March on account and ending inventory for March is predicted to be 600 units @ $35. Purchases on account are paid 100% in the month following the purchase.
d. The Budgeted Income Statement shows a net income of $48,000 and $26,000 in income tax expense for the quarter ended March 31. Accrued taxes will be paid in April.
e. The Balance Sheet for February shows equipment of $84,000 with accumulated depreciation of $30,000, 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 for March.

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Definitions:

Tax Liability

The total amount of tax owed by an individual, corporation, or other entity to a taxing authority.

Indemnification

The process by which one party agrees to compensate another for any loss or damage that has occurred or may occur.

Fraud

A wrongful statement, action, or concealment pertinent to the subject matter of a contract knowingly made to damage the other party.