The results of operations for the Preston Manufacturing Company for the fourth quarter of 2017 were as

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The results of operations for the Preston Manufacturing Company for the fourth quarter of 2017 were as follows:

$550,000 330,000 220,000 Sales Less variable cost of sales Contribution margin Less fixed production costs Less fixed se

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 2017 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 3 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 2 percent. Fixed selling and administrative costs requiring payment are paid in the quarter they are incurred.
6. The tax rate is expected to be 40 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 2018.
Required
a. Prepare a budgeted income statement for the first quarter of 2018.
b. Prepare a cash budget for the first quarter of 2018.
c. Prepare a budgeted balance sheet as of the end of the first quarter of 2018.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Cash Budget
A cash budget is an estimation of the cash flows for a business over a specific period of time. These cash inflows and outflows include revenues collected, expenses paid, and loans receipts and payment.  Its primary purpose is to provide the...
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