Question

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, 20Y9, the following tentative trial balance as of December 31, 20Y8, is prepared by the Accounting Department of Regina Soap Co.:

Cash	$104,000
Accounts Receivable	199,700
Finished Goods	41,900
Work in Process	28,000
Materials	45,900
Prepaid Expenses	3,400
Plant and Equipment	511,700
Accumulated Depreciation—Plant and Equipment			$220,000
Accounts Payable			181,200
Common Stock, $10 par			250,000
Retained Earnings			283,400
	$934,600		$934,600

Factory output and sales for 20Y9 are expected to total 25,000 units of product, which are to be sold at $120 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	_		$30
Direct labor	_		9.5
Factory overhead:
Depreciation of plant and equipment	$25,000		_
Other factory overhead	7,800		5.5
Selling expenses:
Sales salaries and commissions	89,800		15
Advertising	75,000		_
Miscellaneous selling expense	6,500		2.5
Administrative expenses:
Office and officers salaries	59,000		7.5
Supplies	3,000		1
Miscellaneous administrative expense	1,600		2

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 $272,200 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 25,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $138,000 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
			$fill in the blank 0fd050fa9058fd7_2
Cost of goods sold:
		$fill in the blank 0fd050fa9058fd7_4
		fill in the blank 0fd050fa9058fd7_6
		fill in the blank 0fd050fa9058fd7_8
Cost of goods sold			fill in the blank 0fd050fa9058fd7_9
Gross profit			$fill in the blank 0fd050fa9058fd7_10
Operating expenses:
Selling expenses:
	$fill in the blank 0fd050fa9058fd7_12
	fill in the blank 0fd050fa9058fd7_14
	fill in the blank 0fd050fa9058fd7_16
Total selling expenses		$fill in the blank 0fd050fa9058fd7_17
Administrative expenses:
	$fill in the blank 0fd050fa9058fd7_19
	fill in the blank 0fd050fa9058fd7_21
	fill in the blank 0fd050fa9058fd7_23
Total administrative expenses		fill in the blank 0fd050fa9058fd7_24
Total operating expenses			fill in the blank 0fd050fa9058fd7_25
Income before income tax			$fill in the blank 0fd050fa9058fd7_26
			fill in the blank 0fd050fa9058fd7_28
			$fill in the blank 0fd050fa9058fd7_30

Feedback

2. Prepare a budgeted balance sheet as of December 31, 20Y9.

Regina Soap Co. Budgeted Balance Sheet December 31, 20Y9
Assets
Current assets:
		$fill in the blank 1c652b02efeffdb_2
		fill in the blank 1c652b02efeffdb_4
Inventories:
	$fill in the blank 1c652b02efeffdb_6
	fill in the blank 1c652b02efeffdb_8
	fill in the blank 1c652b02efeffdb_10	fill in the blank 1c652b02efeffdb_11
		fill in the blank 1c652b02efeffdb_13
Total current assets			$fill in the blank 1c652b02efeffdb_14
Property, plant, and equipment:
		$fill in the blank 1c652b02efeffdb_16
		fill in the blank 1c652b02efeffdb_18
Total property, plant, and equipment			fill in the blank 1c652b02efeffdb_19
Total assets			$fill in the blank 1c652b02efeffdb_20
Liabilities
Current liabilities:
			$fill in the blank 1c652b02efeffdb_22
Stockholders' Equity
		$fill in the blank 1c652b02efeffdb_24
		fill in the blank 1c652b02efeffdb_26
Total stockholders’ equity			fill in the blank 1c652b02efeffdb_27
Total liabilities and stockholders’ equity			$fill in the blank 1c652b02efeffdb_28

Answer 1

ANSWER:

Required 1)

Regina Soap Co.

Budgeted Income Statement

For the Year Ending December 31, 20Y9

Sales (25,000 * 120)			3,000,000
Cost of Goods Sold:
Direct Materials (25,000 * 30)		750,000
Direct Labor (25,000 * 9.5)		237,500
Factory Overhead [Fixed cost + (No. of units sold * Other factory overhead per unit sold) + Depreciation] [7,800 + (25,000 * 5.5) + 25,000]		170,300
Less: Cost of Goods Sold			(1,157,800)
Gross Profit			1,842,200
Operation expenses:
Selling expenses:
Sales salaries and commissions [Fixed cost + (No. of units sold * Sales salaries and commissions per unit sold)] [89,800 + (25,000 * 15)]	464,800
Miscellaneous selling expense [Fixed cost + (No. of units sold * Miscellaneous selling expense per unit sold)] [6,500 + (25,000 * 2.5)]	69,000
Advertising	75,000
Total selling expenses		608,800
Administrative expenses:
Office and officer's salaries [Fixed cost + (No. of units sold * Office and officers’ salaries per unit sold)] [59,000 + (25,000 * 7.5)]	246,500
Supplies [Fixed cost + (No. of units sold * Supplies per unit sold)] [3000 + (25,000 * 1)]	28,000
Miscellaneous administrative expense [Fixed cost + (No. of units sold * Miscellaneous administrative expense per unit sold)] [1,600 + (25,000 * 2)]	51,600
Total administrative expenses		326,100
Less: Total operating expenses			(934,900)
Income before income tax			907,300
Income tax expense			(272,200)
Net income			635,100

Regina Soap Co.

Budgeted balance Sheet

For the Year Ending December 31, 20Y9

Assets:
Current assets:
Cash (WN 3)		526,100
Accounts receivable		199,700
Inventories:
Finished goods	41,900
Work in process	28,000
Raw materials	45,900	115,800
Prepaid expenses		3,400
Total current assets			845,000
Property, plant, and equipment:
Plant and equipment (WN 1a)		649,700
Less: Accumulated depreciation (WN 1b)		(245,000)	404,700
Total assets			1,249,700
Liabilities:
Current liabilities:
Accounts payable			181,200
Stockholders equity:
Common stock		250,000
Retained earnings (Beginning Balance + Net Income - Dividend paid) (283,400 + 635,100 - 100,000)		818,500
Total stockholders equity			1,068,500
Total liabilities and stockholders equity			1,249,700

Working Notes:

WN 1)

Property, plant and equipment:

a. Plant and equipment:

= Beginning balance + Newly purchase in May

= $511,700 + $138,000 = $649,700

b. Accumulated depreciation:

= Beginning balance + Depreciation expense

= $220,000 + $25,000 = $245,000

WN 2) Dividend Paid = 25000 share * $1 * 4 times (quarterly paid) = $100,000

WN 3)

Total assets = Total liabilities and stockholders equity

So,

Total liabilities and stockholders equity = Cash + Accounts receivable + Inventories + Prepaid expenses + Property, plant and equipment

Cash = Total liabilities and stockholders equity - (Accounts receivable + Inventories + Prepaid expenses + Property, plant and equipment)

Cash = 1,249,700 - (199,700 + 115,800 + 3,400 + 404,700)

= $526,100