Budgeted Income Statement and Balance Sheet As a preliminary to requesting budge
ID: 2415219 • Letter: B
Question
Budgeted Income Statement and Balance Sheet
As a preliminary to requesting budget estimates of sales, costs, and expenses for the fiscal year beginning January 1, 2017, the following tentative trial balance as of December 31, 2016, is prepared by the Accounting Department of Mesa Publishing Co.:
Cash
$ 26,000
Accounts Receivable
23,800
Finished Goods
16,900
Work in Process
4,200
Materials
6,400
Prepaid Expenses
600
Plant and Equipment
82,000
Accumulated Depreciation—Plant and Equipment
$ 32,000
Accounts Payable
14,800
Common Stock, $1.50 par
30,000
Retained Earnings
83,100
$159,900
$159,900
Factory output and sales for 2017 are expected to total 3,800 units of product, which are to be sold at $120 per unit. The quantities and costs of the inventories at December 31, 2017, are expected to remain unchanged from the balances at the beginning of the year.
Budget estimates of manufacturing costs and operating expenses for the year are summarized as follows:
Estimated Costs and Expenses
Fixed
(Total for Year)
Variable
(Per Unit Sold)
Cost of goods manufactured and sold:
Direct materials
_
$30.00
Direct labor
_
8.40
Factory overhead:
Depreciation of plant and equipment
$ 4,000
_
Other factory overhead
1,400
4.80
Selling expenses:
Sales salaries and commissions
12,800
13.50
Advertising
13,200
_
Miscellaneous selling expense
1,000
2.50
Administrative expenses:
Office and officers salaries
7,800
7.00
Supplies
500
1.20
Miscellaneous administrative expense
400
2.40
Balances of accounts receivable, prepaid expenses, and accounts payable at the end of the year are not expected to differ significantly from the beginning balances. Federal income tax of $35,000 on 2017 taxable income will be paid during 2017. Regular quarterly cash dividends of $0.20 per share are expected to be declared and paid in March, June, September, and December on 20,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $22,000 cash in May.
Required:
X
Part 1: Budgeted Income Statement
1. Prepare a budgeted income statement for 2017.
Mesa Publishing Co.
Budgeted Income Statement
For the Year Ending December 31, 2017
$
Cost of goods sold:
$
Cost of goods sold
Gross profit
$
Operating expenses:
Selling expenses:
$
Total selling expenses
$
Administrative expenses:
$
Total administrative expenses
Total operating expenses
Income before income tax
$
$
X
Part 2: Budgeted Balance Sheet
2. Prepare a budgeted balance sheet as of December 31, 2017.
Mesa Publishing Co.
Budgeted Balance Sheet
December 31, 2017
Assets
Current assets:
Inventories:
Total current assets
Property, plant, and equipment:
Total assets
Liabilities
Current liabilities:
Stockholders' Equity
Total stockholders’ equity
Total liabilities and stockholders’ equity
Cash
$ 26,000
Accounts Receivable
23,800
Finished Goods
16,900
Work in Process
4,200
Materials
6,400
Prepaid Expenses
600
Plant and Equipment
82,000
Accumulated Depreciation—Plant and Equipment
$ 32,000
Accounts Payable
14,800
Common Stock, $1.50 par
30,000
Retained Earnings
83,100
$159,900
$159,900
Explanation / Answer
1. Mesa Publishing Company;
Budgeted Income Statement for the year ended December 31 2017:
2. Budgeted balance sheet as of December 31 2017
Inventories:
Ending cash balance = Beginning cash balance + Net income + depreciation - dividends - equipment purchase =
26,000+ 221,140 +4,000 - 16,000 - 22,000 = $ 213,140
$ Sales (3,800 units @ $ 120) 456,000 Less cost of goods sold (3,800 @ $ 43.20) 164,160 Gross profit 291,840 Operating expenses: Selling expenses Sales salaries and commissions 12,800 Advertising 13,200 Miscellaneous selling expenses 1,000 27,000 Administrative expense Salaries 7,800 Supplies 500 Miscellaneous expenses 400 8,700 Income before income tax 256,140 Income tax 35,000 Net operating income 221,140Related Questions
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