Budgeted Income Statement and Balance Sheet As a preliminary to requesting budge

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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 Webster Publishing Co.:

Factory output and sales for 2017 are expected to total 26,000 units of product, which are to be sold at $110 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:

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 Webster Publishing Co.: Cash $107,600 Accounts Receivable 206,600 Finished Goods 43,400 Work in Process 28,900 Materials 47,500 Prepaid Expenses 3,500 Plant and Equipment 507,900 Accumulated Depreciation—Plant and Equipment $218,400 Accounts Payable 186,000 Common Stock, $10 par 250,000 Retained Earnings 291,000 $945,400 $945,400 Factory output and sales for 2017 are expected to total 26,000 units of product, which are to be sold at $110 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 _ $28 Direct labor _ 8.5 Factory overhead: Depreciation of plant and equipment $26,000 _ Other factory overhead 8,100 5 Selling expenses: Sales salaries and commissions 93,300 14 Advertising 78,000 _ Miscellaneous selling expense 6,800 2 Administrative expenses: Office and officers salaries 61,400 7 Supplies 3,100 1 Miscellaneous administrative expense 1,600 1.5 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 $251,900 on 2017 taxable income will be paid during 2017. Regular quarterly cash dividends of $1 per share are expected to be declared and paid in March, June, September, and December on 25,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $137,000 cash in May.

2. Prepare a budgeted balance sheet as of December 31, 2017.

Cash $107,600 Accounts Receivable 206,600 Finished Goods 43,400 Work in Process 28,900 Materials 47,500 Prepaid Expenses 3,500 Plant and Equipment 507,900 Accumulated Depreciation—Plant and Equipment $218,400 Accounts Payable 186,000 Common Stock, $10 par 250,000 Retained Earnings 291,000 $945,400 $945,400

Explanation / Answer

Budgeted Income Statement For the Year Ending December 31, 2017 Sales $28,60,000 Cost of goods sold: Direct materials $7,28,000 Direct labor $2,21,000 Factory overhead $1,64,100 Cost of goods sold $11,13,100 Gross profit $17,46,900 Operating expenses: Selling expenses: Sales salaries and commissions $4,57,300 Advertising $78,000 Miscellaneous selling expense $58,800 Total selling expenses $5,94,100 Administrative expenses: Office and officers salaries $2,43,400 Supplies $29,100 Miscellaneous administrative expense $40,600 Total administrative expenses $3,13,100 Total operating expenses $9,07,200 Income before income tax $8,39,700 Income tax expense $2,51,900 Net income $5,87,800 Regina Soap Co. Budgeted Balance Sheet December 31, 2017 Assets Current assets: Cash $4,84,400 Accounts receivable $2,06,600 Inventories: Finished goods $43,400 Work in process $28,900 Materials $47,500 Prepaid expenses $3,500 Total current assets $8,14,300 Property, plant, and equipment: Plant and equipment $6,44,900 Less accumulated depreciation $2,44,400 $4,00,500 Total assets $12,14,800 Liabilities Current liabilities: Accounts payable $1,86,000 Stockholders' Equity Common stock $2,50,000 Retained earnings $7,78,800 Total stockholders’ equity $10,28,800 Total liabilities and stockholders’ equity $12,14,800

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