Bill Thomas, Bates & 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 as of December 31 is as follows:

Cash                                                     . . . . . . . . . . . $ 32,400

Accounts Receivable, net                  . . . . . . . . . . .    98,200

Raw Materials Inventory                   . . . . . . . . . . .    22,500

Finished Goods Inventory                 . . . . . . . . . . .    49,280

Property, Plant, & Equipment           . . . . . . . . . . .  300,000

Accumulated Depreciation               . . . . . . . . . . .   (75,000)

Total Assets                                         . . . . . . . . . . . $427,380

Accounts Payable                               . . . . . . . . . . .   $18,000

Income Tax Payable                           . . . . . . . . . . .     26,400

Common Stock                                   . . . . . . . . . . .    100,000

Retained Earnings                              . . . . . . . . . . .    282,980

Total Liabilities & Owners’ Equity     . . . . . . . . . . . $427,380

The company expects a 30% income tax rate, and all quarterly taxes are paid in the first month of the  following quarter.

Required

a. Prepare Bates & Hill’s pro-forma income statement for the first quarter.

b. Prepare Bates & Hill’s pro-forma balance sheet as of March 31.