1. 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, 2017, the following tentative trial balance as of December 31, 2016, is prepared by the Accounting Department of Mesa Publishing Co.: Cash $ 26,000 Accounts Receivable 23,800 Finished Goods 16,900 Work in Process 4,200 Materials 6,400 Prepaid Expenses 600 Plant and Equipment 82,000 Accumulated DepreciationPlant and Equipment $ 32,000 Accounts Payable 14,800 Common Stock, $1.50 par 30,000 Retained Earnings 83,100 $159,900 $159,900 Factory output and sales for 2017 are expected to total 3,800 units of product, which are to be sold at $120 per unit. The quantities and costs of the inventories at December 31, 2017, 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 _ $30.00 Direct labor _ 8.40 Factory overhead: Depreciation of plant and equipment $ 4,000 _ Other factory overhead 1,400 4.80 Selling expenses: Sales salaries and commissions 12,800 13.50 Advertising 13,200 _ Miscellaneous selling expense 1,000 2.50 Administrative expenses: Office and officers salaries 7,800 7.00 Supplies 500 1.20 Miscellaneous administrative expense 400 2.40 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 $35,000 on 2017 taxable income will be paid during 2017. Regular quarterly cash dividends of $0.20 per share are expected to be declared and paid in March, June, September, and December on 20,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $22,000 cash in May. Required: 2. Prepare a budgeted income statement for 2017. 3. Prepare a budgeted balance sheet as of December 31, 2017. 1. Prepare a budgeted income statement for 2017. Mesa Publishing Co. Budgeted Income Statement For the Year Ending December 31, 2017 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 $ 2. Prepare a budgeted balance sheet as of December 31, 2017. Mesa Publishing Co. Budgeted Balance Sheet December 31, 2017 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 Less accumulated depreciation Total assets Liabilities Current liabilities: Accounts payable Stockholders' Equity Common stock Retained earnings Total stockholders equity Total liabilities and stockholders equity