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