Question

Panther Corporation appeared to be experiencing a good year. Sales in the first quarter were one-third ahead of last year, and the sales department predicted that this rate would continue throughout the entire year. The controller asked Janet Nomura, a summer accounting intern, to prepare a draft forecast for the year and to analyze the differences from last year's results. She based the forecast on actual results obtained in the first quarter plus the expected costs of production to be completed in the remainder of the year. She worked with various department heads (production, sales, and so on) to get the necessary information. The results of these efforts follow:

  

PANTHER CORPORATION Expected Account Balances for December 31, Year 2
Cash	$	5,700
Accounts receivable		329,000
Inventory (January 1, Year 2)		192,000
Plant and equipment		565,000
Accumulated depreciation				$	173,000
Accounts payable					189,000
Notes payable (due within one year)					209,000
Accrued payables					102,000
Common stock					370,000
Retained earnings					542,200
Sales revenue					2,490,000
Other income					54,000
Manufacturing costs
Materials		866,000
Direct labor		900,000
Variable overhead		625,000
Depreciation		29,000
Other fixed overhead		40,000
Marketing
Commissions		120,000
Salaries		73,000
Promotion and advertising		223,000
Administrative
Salaries		73,000
Travel		14,500
Office costs		45,000
Income taxes		—
Dividends		29,000
	$	4,129,200		$	4,129,200

  
Adjustments for the change in inventory and for income taxes have not been made. The scheduled production for this year is 410,000 units, and planned sales volume is 340,000 units. Sales and production volume was 240,000 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				$	1,860,000
Other income					71,000		$	1,931,000
Expenses
Cost of goods sold
Materials	$	539,000
Direct labor		566,000
Variable overhead		278,000
Fixed overhead		57,000
	$	1,440,000
Beginning inventory		192,000
	$	1,632,000
Ending inventory		192,000		$	1,440,000
Selling
Salaries	$	63,000
Commissions		69,000
Promotion and advertising		135,000			267,000
General and administrative
Salaries	$	65,000
Travel		13,000
Office costs		41,000			119,000
Income taxes					42,000			1,868,000
Operating profit								63,000
Beginning retained earnings								508,200
Subtotal							$	571,200
Less dividends								29,000
Ending retained earnings							$	542,200

Required:

Prepared a budgeted income statement and balance sheet.

Answer 1

Answer is given below