1. Prepare a quarterly budgeted income statement.

there is an error the Actual retained earnings at the end of the last year totalled $753,370 and not $243,370

Big Banana Sport Drinks is a business that sells a specialty sports drinks. The company's fiscal year ends on December 31 . Information to be used for the operating budget this coming year follows. Sales and Merchandise Purchases Budget Information - Sales for this coming year ending December 31 in units are expected to be as follows: - Each unit is sold for $12. - Cost of goods sold is 52 percent of sales (to be used for the merchandise purchases budget). Merchandise inventory is maintained at a level equal to 20 percent of the next quarter's cost of goods sold. Budgeted sales for the first quarter of the following year are $1,518,000. Operating and Interest Expenses Budget Information - Management estimates all other costs, aside from advertising and depreciation, are fixed. - Selling and administrative cost estimates for the first quarter of the coming year are: - Salary expenses for the fourth quarter will be $25,000 higher in anticipation of higher sales. - Advertising expenses for each quarter will be 12% higher than the previous quarter and will therefore increase throughout the year. Capital Expenditure and Cash Budget Information - The company plans to pay cash for property, plant, and equipment totaling $75,000 at the end of the third quarter. Note: this will cause the depreciation for the fourth quarter to increase by $1,450 to $46,550. - The company expects to collect 75 percent of sales in the quarter of sale and 25 percent the quarter following the sale. Accounts receivable at the end of last year totaled $365,000, all of which will be collected during the first quarter of this coming year. - All inventory purchases are on credit. The company expects to pay 60 percent of inventory purchases in the quarter of purchase and 40 percent the following quarter. Accounts payable at the end of last year totaled $280,000, all of which will be paid during the first quarter of this coming year. - The cash balance at the beginning of this coming year is expected to be $68,000. - A dividend payment of $120,000 will be paid in each quarter to the owners of the business. - $150,000 of the long-term debt will be repaid at the end of Q4. Budgeted Balance Sheet Information - Assume 25 percent of fourth quarter budgeted sales will be collected in full the following year (this represents accounts receivable at the end of the fourth quarter). - Big Banana started the year with long-term debt of $800,000. - Expected account balances at the end of the fourth quarter are: - Actual retained earnings at the end of the last year totalled $243,370