Estimated Financial Statements. Ranval Fasteners, Inc. has budgeted operations for each quarter of 1998 as follows: All
Question:
Estimated Financial Statements. Ranval Fasteners, Inc. has budgeted operations for each quarter of 1998 as follows:
All production costs and operating expenses with the exception of depreciation are to be paid during the quarter incurred. Each quarter, depreciation expenses included in production costs and in operating expenses are $40,000 and $20,000, respectively.
Collections on sales are planned at 60 percent during the quarter of the sale and 40 percent during the quarter following the sale. Materials are purchased as needed in production and are not held in inventory. Income tax is estimated at 40 percent of income before income tax and is paid during the subsequent quarter.
Dividends of $100,000 are to be paid in June and again in December if covered by sufficient profits. No dividends will be paid if the profits for the year are expected to be less than $300,000.
A summary balance sheet at December 31, 1997, shows:
Required:
1. Prepare an estimated income statement for each quarter and for the year.
2. Prepare a balance sheet at the end of each quarter of 1998.
3. Comment on changes in assumptions that might endanger the dividend payments.
Step by Step Answer:
Managerial Accounting
ISBN: 9780538842822
9th Edition
Authors: Harold M. Sollenberger, Arnold Schneider, Lane K. Anderson