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Budgeted Income Statement and Balance Sheet As a preliminary to requesting budget estimates of sales, costs,...

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 $115,400
Accounts Receivable 223,900
Finished Goods 47,000
Work in Process 31,300
Materials 51,500
Prepaid Expenses 3,800
Plant and Equipment 518,100
Accumulated Depreciation—Plant and Equipment $222,800
Accounts Payable 163,100
Common Stock, $10 par 350,000
Retained Earnings 255,100
$991,000 $991,000

Factory output and sales for 20Y4 are expected to total 27,000 units of product, which are to be sold at $110 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 _ $28
Direct labor _ 8.5
Factory overhead:
  Depreciation of plant and equipment $27,000 _
  Other factory overhead 8,400 5
Selling expenses:
Sales salaries and commissions 96,900 14
Advertising 81,000 _
Miscellaneous selling expense 7,000 2
Administrative expenses:
Office and officers salaries 63,700 7
Supplies 3,200 1
Miscellaneous administrative expense 1,700 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 $261,600 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 35,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $140,000 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 $

Solutions

Expert Solution

Regina Soap Co.
Budgeted Income Statement For the Year Ending December 31, 20Y4
Particulars Amount in $
Sales (Note 1) 2970000
Less :Cost of goods sold (Note 2) -1236900
Gross profit 1733100
Less :
Operating expenses: 0
Selling expenses:( Note 3) -562900
Administrative expenses: (Notes 4) -325,100
Income before income tax 845,100
Less: Tax -261,600
Income after Tax 583,500
Less:Dividend -140,000 @$1 per share for 4 quarters for 35000 shares
Income transferable to retained earnings 443,500
Regina Soap Co.
Budgeted Balance Sheet
December 31, 20Y4
Assets $ $
Current assets:
Accounts Receivable 223,900 Same as opening
Prepaid Expenses 3,800 Same as opening
Cash (Note 5) 445900 673,600
Inventories:
Finished Goods 47,000 Same as opening
Work in Process 31,300 Same as opening
Materials 51,500 129,800 Same as opening
Total current assets
Property, plant, and equipment:
Plant and Equipment 658,100 (Opening+ Purchased during the year)
Less : Accumulated Dep. -249,800 408,300 (Opening+ Depericiation of current year)
Total assets 1,211,700
Liabilities
Current liabilities:
Accounts Payable 163,100 163,100 Same as opening
Stockholders' Equity
Total stockholders’ equity (Note 6) 1,048,600 1048600
Total liabilities and stockholders’ equity
1,211,700 0
Note 1 :
Budgeted Sales=Expected No. of units to be sold *Sale price
=27000*110
=2970000
Note 2:
Cost of Goods Sold= Opening Stock+Cost of goods purchased/manufactured during the year-Closing stock
As it is given opening and closing inventory is same so Cost of goods manufactured during the year will be the cost of goods sold
=Direct material + Direct Labour+ Factory overheads
=(27000 units*$28 cost per unit of material)+(27000 units*$ 8.5 cost of labour per unit of material)+($27000 Depericiation on plant and machinery+8400 Other Factory Overheads+27000*$8 variabe;)
=(27000*28)+(27000*8.5)+(27000+8400+216000)
=756000+229500+251400
=1236900
Note 3 :
Selling Expenses Fixed Varible
Sales salaries and commissions 96,900 378000 (14 per unit*27000)
Advertising 81,000
Miscellaneous selling expense 7,000
184,900 378000
Total fixed+ variable 562,900
Note 4:
Administrative Expenses Fixed Varible
Office and officers salaries 63,700 189000 (7 per unit*27000)
Supplies 3,200 27000 (1 per unit*27000)
Miscellaneous administrative expense 1,700 40500 (1.5 per unit*27000)
68,600 256,500
Total fixed+ variable 325,100
Note 5 :
Cash
Opening Cash 115400
Add : Inflows
Sales 2970000 As opening and closing receivable are same so all sales amount realised
Less: outflows
Expenses (COGS+Selling+Admn.-Depericiation Non Cash) -2,097,900 As opening and closing payable are same so all cost amount is paid
Fixed Asset purchased -140000
Dividend -140000 @$1 per share for 4 quarters for 35000 shares
Federal tax -261600
Closing cash 445900
Note 6 :
Total stockholders’ equity
Common Stock, $10 par 350,000
Opening Retained Earnings 255,100
Add : Income of current year transferable to retained earnings 443,500
1,048,600

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