Question

*23) Russell Company has the following projected account balances for June 30, 2015:*

Accounts payable $80,000 Sales $1,600,000
Accounts receivable 200,000 Capital stock 800,000
Depreciation, factory 48,000 Retained earnings ?
Inventories (5/31 & 6/30) 360,000 Cash 112,000
Direct materials used 400,000 Equipment, net 480,000
Office salaries 160,000 Buildings, net 800,000
Insurance, factory 8,000 Utilities, factory 32,000
Plant wages 280,000 Selling expenses 120,000
Bonds payable 320,000 Maintenance, factory 56,000

Required:
a. Prepare a budgeted income statement for June 2015
b. Prepare a budgeted balance sheet as of June 30, 2015.

Objective 6.A

Answer 1

To prepare Russell Company's budgeted income statement and balance sheet for June 2015, calculate gross profit, operating profit, and net profit, then calculate assets, liabilities, and stockholders' equity ensuring the accounting equation balances.

Step-by-step explanation:

Preparing a Budgeted Income Statement and Balance Sheet

To prepare the budgeted income statement for Russell Company for June 2015, we need to follow these steps:

1. 
   
3. First, calculate the Gross Profit by deducting Direct Materials Used, Plant Wages, Factory Depreciation, Insurance for Factory, Utilities for Factory, and Maintenance for Factory from Sales.
4. 
   
6. Then, subtract Office Salaries and Selling Expenses to find the Operating Profit.
7. 
   
9. After that, to find the Net Profit before taxes, you deduct any other expenses or add any other revenues not listed here.
10. 
    
12. Finally, determine the Retained Earnings by adding the Net Profit (assuming no dividends are paid) to the beginning Retained Earnings, which is not provided here.

For the budgeted balance sheet as of June 30, 2015:

1. 
   
3. List all assets, including Accounts Receivable, Inventories, Cash, Equipment, and Buildings.
4. 
   
6. List all liabilities, including Accounts Payable and Bonds Payable.
7. 
   
9. Calculate Stockholders' Equity by adding Capital Stock and the newly calculated Retained Earnings.

Remember the accounting equation: Assets = Liabilities + Stockholders' Equity must balance.