Hello,

With the information below, I am supposed to prepare a budgeted income statement. Our resources and instruction for this class are very poor. I need help with this, but I really want to understand it, as well. I understand if it takes a few hours before I get a response, but I appreciate any help you can offer. If you need additional information, or if a print screen would work better, I can provide that instead. This is part of my homework for the week.

Question info: The results of operations for the Preston Manufacturing Company for the fourth quarter of 2020 were as follows:

Sales					$	550,000
Less variable cost of sales						330,000
Contribution margin						220,000
Less fixed production costs		$	120,000
Less fixed selling and administrative expenses			55,000			175,000
Income before taxes						45,000
Less taxes on income						18,000
Net income					$	27,000

Note: Preston Manufacturing uses the variable costing method. Thus, only variable production costs are included in inventory and cost of goods sold. Fixed production costs are charged to expense in the period incurred. The company's balance sheet as of the end of the fourth quarter of 2020 was as follows:

Assets:
	Cash		$	160,000
	Accounts receivable			220,000
	Inventory			385,000
	Total current assets			765,000
	Property, plant, and equipment			440,000
	Less accumulated depreciation			110,000
Total assets		$	1,095,000
	Liabilities and owners' equity:
	Accounts payable		$	66,000
	Common stock			540,000
	Retained earnings			489,000
	Total liabilities and owners' equity		$	1,095,000

Additional information:

1.		Sales and variable costs of sales are expected to increase by 12 percent in the next quarter.
2.		All sales are on credit with 60 percent collected in the quarter of sale and 40 percent collected in the following quarter.
3.		Variable cost of sales consists of 40 percent materials, 40 percent direct labor, and 20 percent variable overhead. Materials are purchased on credit. Fifty percent are paid for in the quarter of purchase, and the remaining amount is paid for in the quarter after purchase. The inventory balance is not expected to change. Also, direct labor and variable overhead costs are paid in the quarter the expenses are incurred.
4.		Fixed production costs (other than $9,000 of depreciation expense) are expected to increase by three percent. Fixed production costs requiring payment are paid in the quarter they are incurred.
5.		Fixed selling and administrative costs (other than $7,000 of depreciation expense) are expected to increase by two percent. Fixed selling and administrative costs requiring payment are paid in the quarter they are incurred.
6.		The tax rate is expected to be 20 percent. All taxes are paid in the quarter they are incurred.
7.		No purchases of property, plant, or equipment are expected in the first quarter of 2021.

(a)

Prepare a budgeted income statement for the first quarter of 2021.

Preston Manufacturing Company Budgeted Income Statement choosetheaccountingperiod March 31, 2021For the Year Ended March 31, 2021For the Quarter Ended March 31, 2021
selectanincomestatementitem Net income/(loss)Fixed selling and administrative expensesVariable cost of salesIncome before taxesContribution marginSalesFixed production costsTaxes on income				$enteradollaramount
selectbetweenadditionanddeduction AddLess: selectanincomestatementitem Fixed production costsFixed selling and administrative expensesSalesNet income/(loss)Income before taxesContribution marginTaxes on incomeVariable cost of sales				enteradollaramount
selectasummarizinglineforthefirstpart Fixed production costsTaxes on incomeContribution marginFixed selling and administrative expensesNet income/(loss)Variable cost of salesIncome before taxesSales				enteratotalamountforthefirstpart
selectbetweenadditionanddeduction AddLess:
selectanincomestatementitem Net income/(loss)SalesContribution marginTaxes on incomeIncome before taxesVariable cost of salesFixed selling and administrative expensesFixed production costs		$enteradollaramount
selectanincomestatementitem Net income/(loss)Contribution marginTaxes on incomeFixed production costsSalesFixed selling and administrative expensesVariable cost of salesIncome before taxes		enteradollaramount
				enter a subtotal of the two previous amounts
selectasummarizinglineforthesecondpart Income before taxesFixed selling and administrative expensesFixed production costsSalesNet income/(loss)Contribution marginTaxes on incomeVariable cost of sales				enter a total amount for all two parts
selectbetweenadditionanddeduction AddLess: selectanincomestatementitem Taxes on incomeNet income/(loss)Fixed selling and administrative expensesSalesVariable cost of salesFixed production costsIncome before taxesContribution margin				enteradollaramount
selectaclosingnameforthisstatement SalesFixed selling and administrative expensesContribution marginFixed production costsIncome before taxesTaxes on incomeNet income/(loss)Variable cost of sales				$enteratotalnetincomeorlossamount