Q30E - Horngren'S Financial And Managerial Accounting

Question

Preparing the financial budget—budgeted balance sheet 

Barker, Inc. has the following balance sheet at December 31, 2018:

Barker projects the following transactions for 2019: 

Sales on account, \(20,000 

Cash receipts from customers from sales on account, \)17,600 

Purchase of raw materials on account, \(7,000 

Payments on account, \)3,500 

Total cost of completed products, \(16,600, which includes the following:

 Raw materials used, \)7,100 

Direct labor costs incurred and paid, \(3,900

 Manufacturing overhead costs incurred and paid, \)4,800 

Depreciation on manufacturing equipment, \(800

 Cost of goods sold, \)14,800 

Selling and administrative costs incurred and paid, \(500 

Purchase of equipment, paid in 2019, \)2,000 

Prepare a budgeted balance sheet for Barker, Inc. for December 31, 2019. (Hint: It may be helpful to trace the effects of each transaction on the accounting equation to determine the ending balance of each account.)

Step-by-Step Solution

Answer

Answer

The total of balance sheet is $28,350

Step 1: Preparation of budgeted balance sheet

Barker Inc. Budgeted Balance Sheet For December 31, 2019
Assets
Current Assets:
Cash	$5,300
Accounts Receivables	$3,800
Raw material inventory	$400
Finished goods inventory	$3,150
Total current assets		$12,650
Property, plant, and equipment
Equipment	18,000
Less: Accumulated depreciation	($2,300)	$15,700
Total Assets		$28,350
Liabilities
Current Liabilities:
Accounts payable	$4,500
Stockholder’s Equity
Common stock, no par	$6,500
Retained earnings	$17,350
Total stockholder’s equity		$23,850
Total liabilities and stockholder’s equity		$$28,350

Step 2: Preparation of cash budget

Cash in beginning	$2,400
Cash receipts from customers from sales on account	$17,600
Cash available	$20,000
Less: Payments
Payments on account	$3,500
Direct labor cost incurred and paid	$3,900
Manufacturing overhead	$4,800
Selling and administrative expenses	$500
Purchase of equipment	$2,000
Total cash payments	$12,700
Ending cash balance	$5,300