Vaughn & Hill Pro-Forma Financial Statments Accounting Exercise

Exercise 5-30

Bill Thomas, Vaughn & 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 of December 31 is as follows:

Cash $ 49,200
Accounts Receivable (net) 47,970
Finished Goods Inventory 40,180
Raw Materials Inventory 6,199
Property, Plant & Equipment 246,000
Accumulated Depreciation (61,500 )
Total Assets $328,049
Accounts Payable $ 14,760
Income Tax Payable 61,713
Common Stock 82,000
Retained Earnings 169,576
Total Liabilities & Owners Equity $328,049
Selected Estimates Quarter
Budgeted revenue
Selling and administrative expense 218,448
Interest expense 2,772
Cash 25,236
Cost of Goods Sold 822,763
Accounts receivable (net) 111,930
Direct materials 4,559
Finished goods 48,392
Acounts payable 27,224
Notes payable 33,620

Additional Information:

Bates & Hill plans to declare and pay dividends totaling $40,180 in January.
Bates & Hill plans to purchase and pay cash for a piece of land in February at a cost of $59,040.
Bates & Hill plans to purchase equipment in March at a cost of $49,200.
Depreciation for manufacturing overhead $24,600 per month and for selling and administrative $8,200 per month.

The company expects a 25% income tax rate, and all quarterly taxes are paid in the first month of the following quarter.