s 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 | $98,300 | ||
| Accounts Receivable | 187,800 | ||
| Finished Goods | 39,400 | ||
| Work in Process | 26,300 | ||
| Materials | 43,200 | ||
| Prepaid Expenses | 3,200 | ||
| Plant and Equipment | 463,000 | ||
| Accumulated Depreciation—Plant and Equipment | $199,100 | ||
| Accounts Payable | 121,700 | ||
| Common Stock, $10 par | 350,000 | ||
| Retained Earnings | 190,400 | ||
| $861,200 | $861,200 |
Factory output and sales for 20Y9 are expected to total 23,000 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 | $23,000 | _ | ||
| Other factory overhead | 7,100 | 5.5 | ||
| Selling expenses: | ||||
| Sales salaries and commissions | 82,600 | 15 | ||
| Advertising | 69,000 | _ | ||
| Miscellaneous selling expense | 6,000 | 2.5 | ||
| Administrative expenses: | ||||
| Office and officers salaries | 54,300 | 7.5 | ||
| Supplies | 2,800 | 1 | ||
| Miscellaneous administrative expense | 1,400 | 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 $250,400 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 35,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $125,000 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.
Learning Objective 4, Learning Objective 5.
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 | $ | ||
Feedback
Do not forget to include inventories of finished goods, work in process, and materials as assets in the balance sheet.
Calculate the ending retained earnings balance. Include the remaining assets, liabilities, and stockholders' equity.
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What is the probability that the mean cost exceeds $8.50, given that the population standard deviation is $1.50?
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The Landers Corporation needs to raise $1.60 million of debt on a 5-year issue. If it places the bonds privately, the interest rate will be 10 percent. Thirty thousand dollars in out-of-pocket costs will be incurred. For a public issue, the interest rate will be 11 percent, and the underwriting spread will be 2 percent. There will be $140,000 in out-of-pocket costs. Assume interest on the debt is paid semiannually, and the debt will be outstanding for the full 5-year period, at which time it will be repaid. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.
a. For each plan, compare the net amount of funds
initially available—inflow—to the present value of future payments
of interest and principal to determine net present value. Assume
the stated discount rate is 16 percent annually. Use 8.00 percent
semiannually throughout the analysis. (Disregard taxes.)
(Assume the $1.60 million needed includes the underwriting
costs. Input your present value of future payments answers as
negative values. Do not round intermediate calculations and round
your answers to 2 decimal places.)
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a. Are Paula and Simon required to increase their withholding or make estimated tax payments this year to avoid the underpayment penalty?
yes
no
b. By how much, if any. must Paula and Simon increase their withholding and/or estimated tax payments for the year to avoid underpayment penalties?
Increase in withholding
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The amount applied to principle for the third month is
$
(Round to the nearest cent.)
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Enter your answer in dollars, rounded to the nearest cent.
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Garden Depot is a retailer that is preparing its budget for the upcoming fiscal year. Management has prepared the following summary of its budgeted cash flows:
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |
| Total cash receipts | $290,000 | $410,000 | $340,000 | $360,000 |
| Total cash disbursements | $351,000 | $321,000 | $311,000 | $331,000 |
The company’s beginning cash balance for the upcoming fiscal year will be $47,000. The company requires a minimum cash balance of $10,000 and may borrow any amount needed from a local bank at a quarterly interest rate of 3%. The company may borrow any amount at the beginning of any quarter and may repay its loans, or any part of its loans, at the end of any quarter. Interest payments are due on any principal at the time it is repaid. For simplicity, assume that interest is not compounded.
complete the company's cash budget for the upcoming fiscal year. (Cash deficiency, repayments, and interest, should be indicated by a minus sign.)
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What is the price per share of the company's stock? (round answer to 2 decimal places)
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