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

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 Webster Publishing Co.:

Factory output and sales for 2017 are expected to total 25,000 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:

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 $242,200 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 35,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $131,000 cash in May.

Required:

Prepare a budgeted income statement for 2017.

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

Cash $105,800 Accounts Receivable 200,000 Finished Goods 42,000 Work in Process 28,000 Materials 46,000 Prepaid Expenses 3,400 Plant and Equipment 483,500 Accumulated Depreciation—Plant and Equipment $207,900 Accounts Payable 136,800 Common Stock, $10 par 350,000 Retained Earnings 214,000 $908,700 $908,700

Explanation / Answer

Budgeted Income Statement 2017 Particular Amount Amount Amount Sales $2,750,000.00 25000X$110 Less: Cost of Goods manifactured and sold Direct Materials $700,000.00 25000X$28 Direct labor $212,500.00 25000X$8.5 Factory Overhead $157,800.00 $1,070,300.00 25000+7800+(25000*5) Gross Profit $1,679,700.00 Operating Expenses Less: Selling Expenses Sales Salaries and commission $439,800.00 89800+(25000*$14) Advertising $75,000.00 75000 Miscellaneous Selling $56,500.00 $571,300.00 6500+(25000*$2) Less: Administrative Expenses Office and officers salaries $234,000.00 59000+(25000*$7) Supplies $28,000.00 3000+(25000*$1) Misc. $39,100.00 $301,100.00 1600+(25000*$1.5) Income Before Tax $807,300.00 Less: Tax $242,200.00 Net Operating Income $565,100.00 Budgeted Balance Sheet as on 31 December 2017 Assets Current Assets Inventories ($42000+28000+$46000) $116,000 Accounts receivable $200,000 Prepaid Expenses $3,400 Cash (Note-1) $424,900 $744,300 Non Current Assets Plant and Equipment ( Note-2) $381,600 $381,600 $1,125,900 Liabilities Current Liabilities Accounts Payable $136,800 $136,800 StockHolders Equity Equity Capital $350,000 Opening Reserves $214,000 Add:Net profit during year $565,100 Less: Doividend Paid ($1X35000X4) $140,000 $989,100 $1,125,900 Note 1 Opening Cash Balance $105,800 Add:Net profit $565,100 Add:Depreciation $25,000 Less:Fixed Asset additions -$131,000 Less; Dividend Paid -$140,000 Total $424,900 Note 2 Movement of Fixed Assets Opening Gross Block $483,500 Opening Accumulated Depreciation -$207,900 Additions during the year $131,000 Depreciation during the year -$25,000 Net Block-Closing $381,600

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