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

Cash	$108,300
Accounts Receivable	215,500
Finished Goods	45,300
Work in Process	30,200
Materials	49,600
Prepaid Expenses	3,700
Plant and Equipment	561,000
Accumulated Depreciation—Plant and Equipment			$241,200
Accounts Payable			164,700
Common Stock, $10 par			350,000
Retained Earnings			257,700
	$1,013,600		$1,013,600

Factory output and sales for 20Y9 are expected to total 27,000 units of product, which are to be sold at $90 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:

	Estimated Costs and Expenses
	Fixed (Total for Year)		Variable (Per Unit Sold)
Cost of goods manufactured and sold:
Direct materials	_		$23
Direct labor	_		7
Factory overhead:
Depreciation of plant and equipment	$27,000		_
Other factory overhead	8,400		4
Selling expenses:
Sales salaries and commissions	96,900		11.5
Advertising	81,000		_
Miscellaneous selling expense	7,000		2
Administrative expenses:
Office and officers salaries	63,700		5.5
Supplies	3,200		1
Miscellaneous administrative expense	1,700		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 $192,800 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 35,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $151,000 cash in May.

Required:

1. Prepare a budgeted income statement for 20Y9.

Regina Soap Co.
Budgeted Income Statement
For the Year Ending December 31, 20Y9
Sales			$
Cost of goods sold:
Direct materials		$
Direct labor		$
Factory overhead		$
Cost of goods sold			$
Gross profit			$
Operating expenses:
Selling expenses:
Sales salaries and commissions	$
Advertising	$
Miscellaneous selling expense	$
Total selling expenses		$
Administrative expenses:
Office and officers salaries	$
Supplies	$
Miscellaneous administrative expense	$
Total administrative expenses		$
Total operating expenses			$
Income before income tax			$
Income tax expense			$
Net income			$

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

Regina Soap Co. Budgeted Balance Sheet December 31, 20Y9
Assets
Current assets:
Cash		$
Accounts receivable		$
Inventories:
Finished goods	$
Work in process	$
Materials	$	$
Prepaid expenses		$
Total current assets			$
Property, plant, and equipment:
Plant and equipment		$
Accumulated depreciation		$
Total property, plant, and equipment			$
Total assets			$
Liabilities
Current liabilities:
Accounts payable			$
Stockholders' Equity
Common stock		$
Retained earnings		$
Total stockholders’ equity			$
Total liabilities and stockholders’ equity			$

The boxes with "$" need to be filled in.

Answer 1

REGINA SOAP co. Budgeted Inc ome Statement For the Year Ending December 31, 20Y9 Sales 2,430,000 Cost of goods sold: Direct materials 621,000 Direct labor 189,000 143,400 Factory overhead 953,400 Cost of goods sold Gross profit Operating expense s: Selling expenses: 1,476,600 407,400 Sales sal aries and commissions 81,000 Advertising Miscellaneous sell ing expense 61,000 Total selling expenses 549,400 Administrative expenses: Office and officers salaries 212,200 30,200 Supplies Miscellaneous admin. expenses 42,200 Total administrative expenses 284,600 Total operating expenses 834,000 Income before income tax 642,600 192,800 Income tax expense 449,800 Net income

Supporting cal culations for budgeted income statement: Factory overhead: Office and officers salaries: 108,000 Fixed portion 63,700 148,500 Variable overhe ad 27,000 Variable portion Depreciation Other Total 8,400 212,200 143,400 Total Sales salaries and commissions: Suppliesexpense: Fixed portion Fixed portion 3,200 96,900 310,500 Variable portion Variable portion 27,000 407,400 Total Total 30,200 Miscell ane ous administrative expenses: Miscellaneous sell ing expenses: Fixed portion Fixed portion 7,000 1,700 54,000 Variable portion Variable portion 40,500 Total 61,000 Total 42,200

REGINA SOAP CO Budgeted Balance Sheet For the Year Ending December 31, 20Y9 Assets Current assets: Cash 294,100 Accounts receivable 215,500 Inventories: Finished goods Work in process 45,300 30,200 Materials 49,600 125, 100 Prepaid expenses 3,700 Total current assets 638,400 Property, plant, and equipment: 712,000 268,200 Plant and equipment (561000+151000) Less accumulated depreciation (241200+27000) 443,800 Total assets 1,082,200 Liabilities Current liabilities: Accounts payable 164,700 Stoc kholders' Equity Common stock 350,000 567,500 Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 917,500 1,082,200

Supporting calculations for budgeted balance sheet: Cash balance: Bal an ce, Januar 1, 20Y9 Plus cash from operations: 108,300 Net income (from budgeted income statement) 449,800 Depreciation (add back non cash item) 476,800 27,000 Less planned nonoperating cash outflows: Dividends to be paid in 20Y9 (35000*1*4) 140,000 Plant and equipment to be acquired in 20Y9 151,000 291,000 Balan ce, December 31, 20Y9 294,100 Retained earnings balance: Bal an ce, Januar 1, 20Y9 Plusexpected net income for 20Y9 257,700 449,800 Less dividendsto be paid in 20Y9 140,000 Balan ce, December 31, 20Y9 567,500