Question

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	$107,900
Accounts Receivable	200,700
Finished Goods	42,100
Work in Process	28,100
Materials	46,200
Prepaid Expenses	3,400
Plant and Equipment	486,600
Accumulated Depreciation—Plant and Equipment			$209,200
Accounts Payable			138,800
Common Stock, $10 par			350,000
Retained Earnings			217,000
	$915,000		$915,000

Factory output and sales for 20Y9 are expected to total 25,000 units of product, which are to be sold at $100 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	_		$25
Direct labor	_		8
Factory overhead:
Depreciation of plant and equipment	$25,000		_
Other factory overhead	7,800		4.5
Selling expenses:
Sales salaries and commissions	89,800		12.5
Advertising	75,000		_
Miscellaneous selling expense	6,500		2
Administrative expenses:
Office and officers salaries	59,000		6.5
Supplies	3,000		1
Miscellaneous administrative expense	1,600		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 $212,200 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 $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
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.

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

1) budgeted income statement for the year ended on 31 december, 2019

ragina soap co.

particular	amounts in $
sales (a)	25000x100= 2500000
cost of goods sold:
direct material	25000x25=625000
direct labour	25000x8=200000
factory overhead (25000+(7800+(2500x4.5)))	145300
cost of goods sold(b)	970300
gross profit (c)=(a-b)	1529700
operating exp.:
selling exp.:
sales salaries and commission(89800+(2500x12.5))	402300
advertisement (fixed)	75000
misc. exp.(6500+(25000x2))	56500
total selling exp. (d)	533800
administrative exp.:
officer and officer salaries(59000+(25000x6.5))	221500
supplies(3000+(25000x1))	28000
misc. administrative exp.(1600+25000x1.5))	39100
total administrative exp.(e)	288600
Total operating expenses (f)=(d+e)	822400
Income before income tax (g)=(c-f)	707300
income tax exp.(h)	212200
net income(i)=(g-h)	495100
retained earning opening balance (j)	217000
dividend paid (k) (35000x4=140000)	140000
retained earning closing balance (l)= (i+j-k)	572100

2) budgeted balance sheet ended on 31 december, 2019

ragina soap co.

particular	amounts in $
assets
current assets:
cash ( note 1 )	357000
account receivables	200700
inventories:
finished goods	42100
wip	28100
materials	46200
prepaid exp.	3400
total current assets (a)	677500
property, plant and equipment:
plant and equipment(486600+131000)	617600
accumulated depreciation(209200+25000)	(234200)
total property, plant and equipment (b)	383400
total assets(a+b)	1060900
liabilities
current liabilities:
account payables (c)	138800
shareholder's equity:
common stock	350000
retained earnings(217000+	572100
total stock holder's equity (d)	922100
total liabilities and stock holder's equity (c+d)	1060900

note 1 cash a/c

particular	debit	particula	credit
to balance b/d	107900	by dividend: march	35000
to sales	2500000	june	35000
		september	35000
		december	35000
		by machine a/c	131000
		by cost of ggods sold ( not depreciation)	945300
		by operating ep.	822400
		by income tax paid	212200
		by balance c/d	357000
	2607900		2607900

it is assumed all sales is received and all exp. except depreciation has been paid.

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