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	$103,100
Accounts Receivable	177,300
Finished Goods	37,200
Work in Process	24,800
Materials	40,800
Prepaid Expenses	3,000
Plant and Equipment	486,600
Accumulated Depreciation—Plant and Equipment			$209,200
Accounts Payable			141,800
Common Stock, $10 par			300,000
Retained Earnings			221,800
	$872,800		$872,800

Factory output and sales for 20Y9 are expected to total 24,000 units of product, which are to be sold at $120 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	_		$30
Direct labor	_		9.5
Factory overhead:
Depreciation of plant and equipment	$24,000		_
Other factory overhead	7,400		5.5
Selling expenses:
Sales salaries and commissions	86,200		15
Advertising	72,000		_
Miscellaneous selling expense	6,200		2.5
Administrative expenses:
Office and officers salaries	56,600		7.5
Supplies	2,900		1
Miscellaneous administrative expense	1,500		2

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 $261,400 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 30,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $131,000 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
			$
Cost of goods sold:
		$
Cost of goods sold
Gross profit			$
Operating expenses:
Selling expenses:
	$
Total selling expenses		$
Administrative expenses:
	$
Total administrative expenses
Total operating expenses
Income before income tax			$
			$

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

Regina Soap Co. Budgeted Balance Sheet December 31, 20Y9
Assets
Current assets:
		$
Inventories:
	$
Total current assets			$
Property, plant, and equipment:
		$
Total property, plant, and equipment
Total assets			$
Liabilities
Current liabilities:
			$
Stockholders' Equity
		$
Total stockholders’ equity
Total liabilities and stockholders’ equity			$

Answer 1

1. Budgeted Income Statement for 20Y9
Regina Soap Co.
Budgeted Income Statement
For the Year Ending December 31, 20Y9
Total Unit produced and sold	24,000	(fingures in $)
	per unit	Variable cost	Fixed cost	Total
Sales	120.0			28,80,000
Direct material	30.0	7,20,000	-	7,20,000
Direct labour	9.5	2,28,000	-	2,28,000
Factory OH
Depreciation			24,000	24,000
Other factory OH	5.5	1,32,000	7,400	1,39,400
Cost of goods sold				11,11,400
Gross profit				17,68,600
Operating expenses:
Selling expenses:
Sales salaries and commissions	15.0	3,60,000	86,200	4,46,200
Advertising		-	72,000	72,000
Misc. selling expenses	2.5	60,000	6,200	66,200
Total selling expenses				5,84,400
Administrative expenses:
Office and officers salaries	7.5	1,80,000	56,600	2,36,600
Supplies	1.0	24,000	2,900	26,900
Miscellaneous administrative expense	2.0	48,000	1,500	49,500
Total administrative expenses				3,13,000
Total operating expenses				8,97,400
Income before income tax				8,71,200
Less:Income tax				2,61,400
Income after tax				6,09,800
Dividend				1,20,000
Retained earning for current year				4,89,800

2. Prepare a budgeted balance sheet as of December 31, 20Y9.
Regina Soap Co.
Budgeted Balance Sheet
December 31, 20Y9	Op. balance	Addition	Closing balance
Assets
Current assets:
Cash	1,03,100	3,82,800	4,85,900
Account receivable	1,77,300	-	1,77,300
Prepaid Expenses	3,000	-	3,000
Inventories:
Finished Goods	37,200	-	37,200
Work in Process	24,800	-	24,800
Materials	40,800	-	40,800
Total current assets	3,86,200	3,82,800	7,69,000
Property, plant, and equipment:	4,86,600	1,31,000	6,17,600
less: accumulated depreciation	-2,09,200	-24,000	-2,33,200
Total property, plant, and equipment	2,77,400	1,07,000	3,84,400
Total assets	6,63,600	4,89,800	11,53,400
Liabilities
Current liabilities:
Accounts payable	1,41,800		1,41,800
	1,41,800	-	1,41,800
Stockholders' Equity
Common stock	3,00,000		3,00,000
Retained earnings	2,21,800	4,89,800	7,11,600
Total stockholders’ equity	5,21,800	4,89,800	10,11,600
Total liabilities and stockholders’ equity	6,63,600	4,89,800	11,53,400
Check	-	-	-