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, 20Y9, the following tentative trial balance as of December 31, 20Y8, is prepared by the Accounting Department of Regina Soap Co.:

Factory output and sales for 20Y9 are expected to total 27,000 units of product, which are to be sold at $110 per unit. The quantities and costs of the inventories at December 31, 20Y9, 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 $261,600 on 20Y9 taxable income will be paid during 20Y9. 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 $146,000 cash in May.

Required:

1. Prepare a budgeted income statement for 20Y9.

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2. Prepare a budgeted balance sheet as of December 31, 20Y9.

Cash $118,900 Accounts Receivable 217,600 Finished Goods 45,700 Work in Process 30,500 Materials 50,000 Prepaid Expenses 3,700 Plant and Equipment 542,200 Accumulated Depreciation—Plant and Equipment $233,100 Accounts Payable 204,900 Common Stock, $10 par 250,000 Retained Earnings 320,600 $1,008,600 $1,008,600

Explanation / Answer

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1. Budgeted Income Statement Working $ Sales 27000*110 2970000 Cost of goods sold: Direct Material 27000*28 756000 Direct Labor 27000*8.5 229500 Factory Overhead 27000*5+(27000+8400) 170400    Cost of Goods Sold 1155900 Gross Profit Sale-COGS 1814100 Operating Expenses: Selling Expenses:     Salaries Sales & Commission (27000*14)+96900 474900     Advertising 81000 81000     Misc Selling Expense (27000*2)+7000 61000     Total Selling Expense 616900 Administrative Expense:     Office and officers salaries (27000*7)+63700 252700     Supplies (27000*1)+3200 30200     Misc Admin Expense (27000*1.5)+1700 42200     Total Administrative Expense 325100 Total Operating Expense 942000 Income before Income Tax Gross Profit-Total Operating Expense 872100 Income Tax Expense 261600 Net Income 610500 2. Budgeted Balance sheet Current Assets: Cash Working-1 573400 Accounts Receivable 217600 Inventories: Finished Goods 45700 Work in Process 30500 Material 50000 126200 Prepaid Expense 3700     Total Current Assets 920900 Property, plant, and equipment: Plant and equipment 542200+146000 688200 Accumulated depreciation -233100 Total property, plant, and equipment 455100 Total assets 1376000 Current liabilities: Accounts payable 204900 Stockholders' Equity: Common stock 250000 Retained earnings 320600-10000 Dividend+610500 Net Income 921100 Total stockholders’ equity 1171100 Total liabilities and stockholders’ equity 1376000

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