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		$1,156,200
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.