13-58 Comprehensive Budget Plan

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	$4,800
Accounts receivable	$320,000
Inventory (January 1, year 2)	$192,000
Plant and equipment	$520,000
Accumulated depreciation		$164,000
Accounts payable		$180,000
Notes payable (due within one year)		$200,000
Accrued payables		$93,000
Common stock		$280,000
Retained earnings		$432,800
Sales revenue		$2,400,000
Other income		$36,000
Manufacturing costs:
Materials	$852,000
Direct labor	$872,000
Variable overhead	$520,000
Depreciation	$20,000
Other fixed overhead	$31,000
Marketing:
Commissions	$80,000
Salaries	$64,000
Promotion and advertising	$180,000
Administrative:
Salaries	$64,000
Travel	$10,000
Office costs	$36,000
Income taxes	------
Dividends	$20,000
	$3,785,800	$3,785,800

Adjustments for the change in inventory and for income taxes have not been made. The scheduled production for this year is 450,000 units, and planned sales volume is 400,000 units. Sales and production volume was 300,000 units last year. The company uses a full-absorption costing and FIFO inventory system and is subject to a 40% 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		$1,800,000
Other income		$60,000	$1,860,000
Expenses:
Cost of goods sold
Materials	$528,000
Direct labor	$540,000
Variable overhead	$324,000
Fixed overhead	$48,000
	$1,440,000
Beginning inventory	$192,000
	$1,632,000
Ending inventory	$192,000	$1,440,000
Selling:
Salaries	$54,000
Commissions	$60,000
Promotion and advertising	$126,000	$240,000
General administrative:
Salaries	$56,000
Travel	$8,000
Office costs	$32,000	$96,000
Income taxes		$33,600	$1,809,600
Operating profit			$50,400
Beginning retained earnings			$402,400
Subtotal			$452,800
Less dividends			$20,000
Ending retained earnings			$432,800

Required

Prepare a balance sheet.