Question

The Duncan Company has just completed a number of budgets for the coming year. The cost of goods manufactured schedule, the proforma income statement and the balance sheet still have to be completed. The following information is available:

Prior year Balance Sheet:

Cash	$35,000	Accounts Payable	$98,000
Accounts Receivable	45,000	Other Current Liabilities	39,000
Materials Inventory	35,000	Income Taxes Payable	21,000
WIP Inventory	25,000
Finished Goods Inventory	32,000	Long-Term Debt	250,000
Prepaid Expenses	15,000
Plant and Equipment	450,000	Common Stock	100,000
Accumulated Depreciation	(120,000)	Retained Earnings	27,000
Other Assets	18,000
Total Assets	$535,000	Total Liab. & Equity	$535,000

Information from recent budgets for the coming year:

1. Projected sales are $1,800,000 (12,690 units)

2. Projected direct material purchases are $500,000
3. Projected direct material usage is $495,000

4. Projected direct labor expense is $400,000

5. Projected overhead is $380,000

6. Projected selling expenses are $120,000
7. Projected administrative expenses are $300,000
8. Projected cash collections are $1,785,000
9. Projected payments for materials (accounts payable) are $520,000
10. Projected payments for other operating expenses (other current liabilities) are $1,130,000

11. Projected depreciation expense is $55,000 and is already included in mfg overhead

Additional information that is available:

1. The expected tax rate is 35%
2. The company is planning a stock issue of $25,000

3. Income taxes are paid 3 months after the year-end

4. The company anticipates purchasing a new patent for $10,000 during the year.

5. WIP inventory is expected to decrease by $2,000

6. Finished goods inventory is expected to increase by $8,000

7. Due to insurance rate increases, it is expected that prepaid expenses will increase by $3,000

Investment information:

1. A purchase of additional equipment for $75,000 is expected on January 1^st.
2. The purchase will be made using $50,000 cash and long-term debt will be increased by $25,000

Long-Term Debt information:

1. All long-term debt will have an 8% annual rate.

2. A payment of $50,000 including BOTH principle and interest will be made on December 31^st.

Required: Prepare a cost of goods manufactured schedule, a proforma income statement and proforma balance sheet.

Answer 1

Duncan Company
Cost of Good Manufactured Statement
For the year ended Dec 31,
Direct Material used
Beginning Inventory	35,000.00
Raw Material purchased	500,000.00
Total raw material available	535,000.00
Less: Ending Inventory	(40,000.00)
Direct Material Used		495,000.00
Direct Labour		400,000.00
Manufacturing Overhead		380,000.00
Total Manufacturing Cost		1,275,000.00
Add: Beginning Work in process		25,000.00
		1,300,000.00
Less: Ending Work in process		(23,000.00)
Cost of Good Manufactured		1,277,000.00

Duncan Company
Income Statement
For the year ended Dec 31
Sales		1,800,000.00
Finished Good Opening	32,000.00
Cost of good manufactured	1,277,000.00
Finished Good Closing	(24,000.00)
Cost of good manufactured		1,285,000.00
Gross Profit		515,000.00
Less: Expenses
Selling Expenses	120,000.00
Administrative Expenses	300,000.00
Financial Charges	22,000.00
Total Expenses		442,000.00
Net profit before tax		73,000.00
Tax @ 35%		25,550.00
Net profit		47,450.00

Duncan Company
Balance Sheet
As of year ended Dec 31
	Prior Year		Projected
ASSETS
Current Assets
Cash	35,000.00		61,000.00
Accounts Receivable	45,000.00		60,000.00
Material Inventory	35,000.00		40,000.00
WIP Inventory	25,000.00		23,000.00
Finished Goods Inventory	32,000.00		24,000.00
Prepaid Expenses	15,000.00	187,000.00	18,000.00	226,000.00
Property, Plant & Equipment
Plant and Equipment	450,000.00		525,000.00
Accumulated Depreciation	(120,000.00)	330,000.00	(175,000.00)	350,000.00
Other Assets		18,000.00		28,000.00
Total Assets		535,000.00		604,000.00
Liabilities & Stockholders' Equity
Liabilities
Current Liabilities
Accounts Payable	98,000.00		78,000.00
Other Current Liabilities	39,000.00		54,000.00
Income Taxes Payable	21,000.00	158,000.00	25,550.00	157,550.00
Long Term Debts		250,000.00	247,000.00	247,000.00
Total Liabilities		408,000.00		404,550.00
Stockholders' Equity
Common Stock	100,000.00		125,000.00
Retained Earnings	27,000.00		74,450.00
			199,450.00
Total Stockholders' Equity		127,000.00		199,450.00
Total Liabilities & Stockholders' Equity		535,000.00		604,000.00

Cash
Opening Balance	35,000.00	Payment for material	520,000.00
Cash Collection	1,785,000.00	Payment for operating	1,130,000.00
Common Stock	25,000.00	Patent	10,000.00
		Equipment	50,000.00
		Income tax payable	21,000.00
		Financial Charges	22,000.00
		Long Term Liabilities	28,000.00
		Prepaid Expense	3,000.00
		Closing Balance	61,000.00
	1,845,000.00		1,845,000.00
Other Current Liabilities
Cash Payment	1,130,000.00	Opening Balance	39,000.00
Closing Balance	54,000.00	Expenses	1,145,000.00
	1,184,000.00		1,184,000.00