In: Accounting
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 |
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---|---|---|---|
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 | $ |
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 | |||