Question

The Dawson Company has just completed a number of budgets for the coming year. The cost of goods manufactured schedule, the pro forma income statement, and the balance sheet still have to be completed.

The following information is available as 12/31/X8.

Prior Year Balance Sheet

Assets
Cash	$45,000
Accounts Receivable	$55,000
Materials Inventory	$40,000
Work-in-Process Inventory	$30,000
Finished Goods Inventory	$36,000
Prepaid Expenses	$20,000
Plant and Equipment	$500,000
Accumulated Depreciation	($140,000)
Other Assets	$22,000
Total Assets	$608,000

Liabilities and Equity

Accounts Payable	$103,000
Other Current Liabilities	$42,000
Income Taxes Payable	$25,000
Long-Term Debt	$300,000
Total Liabilities	$470,000
Common Stock	$100,000
Retained Earnings	$38,000
Total Equity	$138,000
Total Liabilities and Equity	$608,000

Information From Recent Budgets for the Coming Year

1. Projected sales are $2,080,000 (13,000 units).
2. Projected direct materials purchases are $525,000.
3. Projected direct materials usage is $510,000.
4. Projected direct labor expense is $420,000.
5. Projected overhead is $390,000.
6. Projected selling expenses are $130,000.
7. Projected administrative expenses are $310,000.
8. Projected cash collections are $1,805,000.
9. Projected payments for materials (accounts payable) are $550,000.
10. Projected payments for other operating expenses (other current liabilities) are $1,155,000.
11. Projected depreciation expense is $60,000 and is already included in manufacturing overhead.

Additional Information That Is Available

1. The expected tax rate is 20%.
2. The company is planning a stock issue of $50,000.
3. Income taxes are paid 3 months after year-end.
4. The company anticipates purchasing a new patent for $20,000 during the year.
5. Work-in-Process Inventory is expected to decrease by $2,500.
6. Finished Goods Inventory is expected to increase by $9,000.
7. Due to insurance rate increases, it is expected that prepaid expenses will increase by $5,000.

Investment Information

1. A purchase of additional equipment for $80,000 is expected on January 2, 20X9.
2. The purchase will be made using $50,000 cash and long-term debt will be increased by $30,000.

Long-Term Debt Information

1. All long-term debt will have a 9% annual rate.
2. A payment of $50,000 including both principal and interest will be made on December 31, 20X9.

Answer 1

Cost of Goods Manufactured,

Add Particuars Direct Material Used Direct Labour Used Manufacturing OH Depreciation (factory Plant) Add Add Amount $ 5,10,000 4,20,000 3,25,000 60,000 13,15,000 30,000 27,500 13,17,500 Add Less Opening WIP Closing WIP Cost of Goods Manufactured

Proforma Income Statement,

Proforma Income statement for the period 01/01/20x9 to 31/12/20X9 Particulars Amount $ Revenue 20,80,000 Cost of goods sold 5,10,000 Gross Profit 15,70,000 Increase (Decrease ) in inventory Manpower Expenses Other Overhead Selling Expenses Administrative expenses Depreciation Finance Cost Total Other Expenses -6,500 4,20,000 3,25,000 1,30,000 3,10,000 60,000 29,700 12,68,200 Profit Before Tax Tax Expenses 20% Profit Transfer to Retained Earnings 3,01,800 60,360 2,41,440

Balance sheet Adjustment 20X8 20x9 18,55,000 20,80,000 5,25,000 18,55,000 18,05,000 5,10,000 2,500 Assets Cash Accounts Receivable Material Inventory Work in Process Inventory Finished Goods inventory Preparid Expenses Plant and Equipemnt Accoumulated Depreciation Other Assets Total Assets Liability and Equity Accounts Payable Other current liability Income taxes Payable |Loang term Debt Total Liability Comman stock Retained Earnings Total Equity Total of Liability and Equity 45,000 55,000 40,000 30,000 36,000 20,000 5,00,000 -1,40,000 22,000 6,08,000 9,000 5,000 80,000 -60,000 20,000 45,000 3,30,000 55,000 27,500 45,000 25,000 5,80,000 -2,00,000 42,000 9,49,500 78,000 5,50,000 11,55,000 25,000 20,300 5,25,000 11,85,000 60,360 30,000 72,000 60,360 1,03,000 42,000 25,000 3,00,000 4,70,000 1,00,000 38,000 1,38,000 6,08,000 50,000 2,41,440 3,09,700 5,20,060 1,50.000 2,79,440 4,29,440 9,49,500

Workings,

Closing Stock of Inventory Particular Material inventory Add: Purchase Less: Usage Closing Stock of Inventory Amount % 40,000 5,25,000 5, 10,000 55,000

Interest on Bond issue - Op $ 300000 Plus issued in 2nd Jan,20X8 $ 30000 = 330000 * 9% = $ 29700 interest

Payment of Bond = 50000-29700 = 20300 Principal component

Cash Opening Balance Sales Realisation Share issued 45,000 18,05,000 50,000 19,00,000 Less: Accounts Payable Other Current Liability Income tax Long term debt with interest Plant and Equipemnt Prepaid insurance other Assets (Petant) 5,50,000 11,55,000 25,000 50000 50000 5000 20000 18,55,000 Closing Cash Balance 45,000

Paticulars Manpower Expenses Other Overhead Selling Expenses Administrative expenses Total other Current Liability Payable Amount $ 4,20,000 3,25,000 1,30,000 3,10,000 11,85,000