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PANTHER CORPORATION Expected Account Balances for December 31, Year 2 Cash $ 5,600 Accounts receivable 328,000...

PANTHER CORPORATION Expected Account Balances for December 31, Year 2

Cash $ 5,600

Accounts receivable 328,000

Inventory (January 1, Year 2) 300,000

Plant and equipment 560,000

Accumulated depreciation $ 172,000

Accounts payable 188,000

Notes payable (due within one year) 208,000

Accrued payables 101,000

Common stock 360,000

Retained earnings 514,600

Sales revenue 2,480,000

Other income 52,000

Manufacturing costs Materials 831,000

Direct labor 881,000

Variable overhead 581,000

Depreciation 28,000

Other fixed overhead 39,000

Marketing Commissions 96,000

Salaries 72,000

Promotion and advertising 196,000

Administrative Salaries 72,000

Travel 14,000

Office costs 44,000

Income taxes - Dividends 28,000 $ 4,075,600

$ 4,075,600 Adjustments for the change in inventory and for income taxes have not been made. The scheduled production for this year is 400,000 units, and planned sales volume is 350,000 units. Sales and production volume was 250,000 units last year. The company uses a full-absorption costing and FIFO inventory system and is subject to a 40 percent income tax rate.

The actual income statement for last year follows:

PANTHER CORPORATION Statement of Income and Retained Earnings For the Budget Year Ended December 31, Year 1 Revenues

Sales revenue $ 1,900,000

Other income 80,000 $ 1,980,000 Expenses

Cost of goods sold

Materials $ 540,000

Direct labor 552,000

Variable overhead 352,000

Fixed overhead 56,000 $ 1,500,000

Beginning inventory 300,000 $ 1,800,000

Ending inventory 300,000 $ 1,500,000

Selling Salaries $ 62,000

Commissions 68,000

Promotion and advertising 134,000 264,000

General and administrative Salaries $ 64,000

Travel 9,500 Office costs 40,000 113,500

Income taxes 41,000 1,918,500

Operating profit 61,500

Beginning retained earnings 481,100

Subtotal $ 542,600

Less dividends 28,000

Ending retained earnings $ 514,600

Required: Prepare a budgeted income statement and balance sheet using Excel template.

Solutions

Expert Solution

Prepare the budgeted income statement as follows

PC Inc
Budgeted Income Statement
For the Year Ended December 31, Year 2
Sales revenue $2,480,000
Other income $52,000
                Total revenues $2,532,000
Expenses
Cost of goods sold
     Materials 831,000
     Direct labor 881,000
     Variable overhead 581,000
     Depreciation and Other fixed costs 67,000 $2,360,000
Add: Beginning inventory $300,000
$2,660,000
Deduct: Ending inventory $590,000
                Total cost of goods sold $2,070,000
Selling costs
            Salaries $72,000
            Marketing commissions $96,000
            Promotion and advertising $196,000
            Total selling costs $364,000
Administrative costs
            Salaries $72,000
            Travel $14,000
             Office costs $44,000
              Total administrative costs $130,000
Income tax benefit ($12,800)
Total expenses $2,551,200
Net loss ($19,200)

Prepare budgeted balance sheet as follows

PC Inc
Budgeted Balance Sheet
December 31, Year 2
Assets
Current Assets
Cash $5,600
Accounts receivable 328,000
Inventory 590,000
Income tax benefit 12,800
             Total current assets $936,400
Plant and equipment 560,000
Less: Accumulated depreciation -172,000 388,000
Total Assets $1,324,400
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 188,000
Notes payable (due within one year) 208,000
Accrued payable 101,000
           Total current liabilities 497,000
Common stock 360,000
Retained earnings 467,400
             Total stockholders equity 827,400
Total liabilities and stockholders' equity 1,324,400

Notes:

PC Inc
Statement of Owners' Equity
For the Year Ended December 31, Year 2
Particulars Amount Amount
Beginning Balance $514,600
Deduct: Net loss ($19,200)
Deduct: Dividends ($28,000) ($47,200)
Ending Balance $467,400
Compute ending inventory units as follows
Ending inventory $300,000
Total production cost last year $1,500,000
Number of units produced and sold 250,000
Cost per unit $6.00
Number of units in ending inventory in Year 1 50,000
Added during the year (400,000 − 350,000) 50,000
Total units of ending inventory in Year 2 100,000
Compute cost of ending inventory as follows
Manufacturing costs $2,360,000
÷ Units Manufactured 400,000
Cost per unit $5.90
× Number of units in ending inventory 100,000
Cost of ending inventory $590,000
Compute income tax as follows
Total revenues $2,532,000
Cost of goods sold $2,070,000
Selling costs $364,000
Administrative costs $130,000
               Total costs $2,564,000
Tax loss ($32,000)
× Tax rate 40%
Tax benefit ($12,800)

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