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 $101,300 Accounts Receivable 185,400 Finished Goods 38,900 Work in Process 26,000 Materials 42,600 Prepaid Expenses 3,200 Plant and Equipment 498,400 Accumulated Depreciation—Plant and Equipment $214,300 Accounts Payable 129,300 Common Stock, $10 par 350,000 Retained Earnings 202,200 $895,800 $895,800 Factory output and sales for 20Y9 are expected to total 24,000 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: 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 $24,000 _ Other factory overhead 7,400 5 Selling expenses: Sales salaries and commissions 86,200 14 Advertising 72,000 _ Miscellaneous selling expense 6,200 2 Administrative expenses: Office and officers salaries 56,600 7 Supplies 2,900 1 Miscellaneous administrative expense 1,500 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 $232,600 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 35,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $135,000 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 $ Feedback Use information from the expected sales, cost of goods manufactured and sold, and selling and administrative expenses. Learning Objective 4, Learning Objective 5. 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 $

Answer 1

Part A

REGINA SOAP CO.

Budgeted Income Statement

For the Year Ending December 31, 20Y9

Sales			2640000
Cost of goods sold:
Direct materials		672000
Direct labor		204000
Factory overhead		151400
Cost of goods sold			1027400
Gross profit			1612600
Operating expenses:
Selling expenses:
Sales salaries and commissions	422200
Advertising	72,000
Miscellaneous selling expenses	54200
Total selling expenses		548400
Administrative expenses:
Office and officers salaries	224600
Supplies	26900
Miscellaneous administrative expense	37500
Total administrative expenses		289000
Total operating expenses			837400
Income before income tax			775200
Income tax expense			232600
Net income			542600

24000*110 = 2640000

24000*28 = 672000

24000*8.5 = 204000

(24000*5)+24000+7400 = 151400

(24000*14)+86200 = 422200

(24000*2)+6200 = 54200

(24000*7)+56600 = 224600

(24000*1)+2900 = 26900

(24000*1.5)+1500 = 37500

Part B

REGINA SOAP CO.

Budgeted Balance Sheet

December 31, 20Y9

Assets
Current assets:
Cash		392900
Accounts receivable		185400
Inventories:
Finshied goods	38,900
Work in process	26,000
Materials	42,600	107500
Prepaid expenses		3200
Total current assets			689000
Property, plant, and equipment:
Plant and equipment		633400
Less accumulated depreciation		238300	395100
Total assets			1084100
LIABILITIES and STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable			129,300
STOCKHOLDERS’ EQUITY
Common stock		350,000
Retained earning		604800
Total stockholders’ equity			954800
Total liabilities and stockholders’ equity			1084100

Cash balance, December 31, 20Y9:

Balance, January 1, 20Y9		101300
Add:      Cash from operations
Net income	542600
Depreciation of plant and equipment	24000	566600
Less:    Dividends to be paid in 20Y9 (35,000 × $1 × 4 qtrs.)	140000
Plant and equipment to be acquired in 20Y9	135000	(275000)
Cash balance, December 31, 20Y9		392900

498400+135000 =633400

214300+24000 =238300

202,200+542600-140000 = 604800