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

Cash $113,000
Accounts Receivable 215,800
Finished Goods 45,300
Work in Process 30,200
Materials 49,600
Prepaid Expenses 3,700
Plant and Equipment 542,400
Accumulated Depreciation—Plant and Equipment $233,200
Accounts Payable 201,600
Common Stock, $10 par 250,000
Retained Earnings 315,200
$1,000,000 $1,000,000

Factory output and sales for 20Y9 are expected to total 27,000 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 $27,000 _
  Other factory overhead 8,400 5.5
Selling expenses:
Sales salaries and commissions 96,900 15
Advertising 81,000 _
Miscellaneous selling expense 7,000 2.5
Administrative expenses:
Office and officers salaries 63,700 7.5
Supplies 3,200 1
Miscellaneous administrative expense 1,700 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 $294,000 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 $146,000 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 $

Solutions

Expert Solution

REGINA SOAP Co.

Budgeted income statement

For the year ended December 31, 20Y9

Sales (27000*120)

3240000

Cost of goods sold:

Direct materials (27000*30)

810000

Direct labor (27000*9.5)

256500

Factory overhead ((27000*5.5)+27000+8400)

183900

Cost of goods sold

1250400

Gross profit

1989600

Operating expenses:

Selling expenses:

Sales salaries and commissions (27000*15)+96900

501900

Advertising

81000

Miscellaneous selling expenses ((27000*2.5)+7000)

74500

Total selling expenses

657400

Administrative expenses:

Office and officer salaries ((27000*7.5)+63700)

266200

Supplies ((27000*1)+3200)

30200

Miscellaneous administrative expenses ((27000*2)+1700)

55700

Total administrative expenses

352100

Total operating expenses

1009500

Income before income tax

980100

Income tax expenses

294000

Net income

$686100

REGINA SOAP Co.

Budgeted balance sheet

December 31, 20Y9

Assets

Current assets

Cash (113000+686100+27000-(25000*1*4)-146000)

580100          

Accounts receivable

215800

Inventories:

Finished goods

45300

Work in process

30200

Materials

49600

125100

Prepaid expenses

3700

Total current assets

924700

Property plant and equipment

Plant and equipment (542400+146000)

688400

Less accumulated depreciation (233200+27000)

260200

428200

Total assets

$1352900

liabilities

Current liabilities:

Accounts payable

201600

Stockholders’ equity

Common stock

250000

Retained earnings (315200+686100-(25000*1*4))

901300

1151300

Total stockholders’ equity

$1352900


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