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, 20Y4, the following tentative trial balance as of December 31, 20Y3, is prepared by the Accounting Department of Regina Soap Co.: Cash $108,600 Accounts Receivable 194,400 Finished Goods 40,800 Work in Process 27,200 Materials 44,700 Prepaid Expenses 3,300 Plant and Equipment 486,500 Accumulated Depreciation—Plant and Equipment $209,200 Accounts Payable 174,100 Common Stock, $10 par 250,000 Retained Earnings 272,200 $905,500 $905,500 Factory output and sales for 20Y4 are expected to total 24,000 units of product, which are to be sold at $90 per unit. The quantities and costs of the inventories at December 31, 20Y4, 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 $24,000 _ Other factory overhead 7,400 4 Selling expenses: Sales salaries and commissions 86,200 11.5 Advertising 72,000 _ Miscellaneous selling expense 6,200 2 Administrative expenses: Office and officers salaries 56,600 5.5 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 $171,400 on 20Y4 taxable income will be paid during 20Y4. 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 $131,000 cash in May. Required: 1. Prepare a budgeted income statement for 20Y4. Regina Soap Co. Budgeted Income Statement For the Year Ending December 31, 20Y4 $ 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, 20Y4. Regina Soap Co. Budgeted Balance Sheet December 31, 20Y4 Assets Current assets: Inventories: Total current assets Property, plant, and equipment: Total assets $ Liabilities Current liabilities: Stockholders' Equity Total stockholders’ equity Total liabilities and stockholders’ equity $ Check My Work2 more Check My Work uses remaining.

Answer 1

1.

Regina Soap Co.
Budgeted Income Statement
For the Year Ending December 31, 20Y4
Sales revenue			2160000
Cost of goods sold:
Direct materials		552000
Direct labor		168000
Factory overheads		127400
Cost of goods sold			847400
Gross profit			1312600
Operating expenses:
Selling expenses:
Sales salaries and commissions	362200
Advertising	72000
Miscellaneous selling expense	54200
Total selling expenses		488400
Administrative expenses:
Office and officers salaries	188600
Supplies	26900
Miscellaneous administrative expense	37500
Total administrative expenses		253000
Total operating expenses			741400
Income before income tax			571200
Income tax			171400
Net income			399800

Workings:

Sales (24000 x $90)	2160000
Direct materials (24000 x $23)	552000
Direct labor (24000 x $7)	168000
Factory overheads (24000 x $4) + $24000 + $7400	127400
Sales salaries and commissions (24000 x $11.50)+$86200	362200
Miscellaneous selling expense (24000 x $2)+$6200	54200
Office and officers salaries (24000 x $5.50)+$56600	188600
Supplies (24000 x $1) + $2900	26900
Miscellaneous administrative expense (24000 x $1.50)+$1500	37500

2.

Regina Soap Co.
Budgeted Balance Sheet
December 31, 20Y4
Assets
Current assets:
Cash		301400
Accounts receivable		194400
Inventories:
Finished goods	40800
Work in process	27200
Materials	44700	112700
Prepaid expenses		3300
Total current assets			611800
Property, plant, and equipment:
Plant and Equipment		617500
Accumulated depreciation-Plant and Equipment		-233200	384300
Total assets			996100
Liabilities
Current liabilities:
Accounts payable			174100
Stockholders' Equity
Common stock, $10 par		250000
Retained earnings		572000
Total stockholders' equity			822000
Total liabilities and stockholders' equity			996100

Workings:

Retained earnings:
Beginning balance	272200
Net income	399800
	672000
Less dividends (25000 x $1 x 4)	100000
Ending balance	572000
Cash:
Beginning balance	108600
Collections from customers	2160000
Payment for expenses
Cost of goods sold (excluding depreciation)	-823400
Operating expenses	-741400
Income taxes	-171400
Dividends (25000 x $1 x 4)	-100000
Purchase of fixed assets	-131000
Ending balance	301400
Plant and Equipment
Beginning balance	486500
Add: Purchases	131000
Ending balance	617500
Accumulated depreciation-Plant and Equipment
Beginning balance	209200
Add: Depreciation on plant and equipment	24000
Ending balance	233200