ACT502 Assignment, Semester 2, 2019 Page 2Question One(100 Marks)Comfort Furniture Pty Ltd manufactures and distributes stylish and practical furniture for hospitality industry in Australia. The company's balance sheet at December 31, 2016is shown below:Comfort FurnitureBalance SheetDecember 31, 2016AssetsCurrent AssetsCash$7,500Accounts receivable$73,500Finished goods inventory (1500 units)$24,000Total current assets$105,000Property, plantand equipmentEquipment$40,000Less: Accumulated depreciation$10,000$30,000Total Assets:$135,000LiabilitiesNotes payable$25,000Accounts payable$45,000Total Liabilities$70,000Stockholders' EquityCommon stock$40,000Retained earnings$25,000Total stockholders' equity$65,000Total liabilities and stockholders' equity$135,000Budgeted data for the year 2017 includes the following:2017Quarter 4TotalSales budget (8,000 units at $32)$76,800$256,000Direct materials used 17,00062,500Direct labour 12,50050,900Manufacturing overhead applied10,00048,600Selling and administrative expenses 18,00075,000Additional Information:To meet sales requirements and to have 2,500 units of finished goods on hand at December 31, 2017, the production budget shows 9,000 required units of output. The total unit cost of production is expected to be $18. The company uses the first-in, first ACT502 Assignment, Semester 2, 2019 Page 3out(FIFO) inventory costing method. Interest expense is expected to be $3,500 for the year. Income taxes are expected to be 40% of income before income taxes, in 2017, the company expects to declare and pay $8,000 cash dividends. The company's cash budget shows and expected cash balance of $5,880 at December 31, 2017. All sales and purchases are on account. It is expected that 60% of quarterly sales are collected in cash within the quarter and the remainder is collected in the following quarter. Direct materials purchased from suppliers and paid 50% in the quarter incurred and the remainder in the following quarter. Purchases in the fourth quarter were the same as the materials used. In 2017, the company expects to purchase additional equipment costing $9,000. $4,000 of depreciation expense on equipment is included in the budget data and split equally between manufacturing overhead and selling and administrative expenses. The company expects to pay $8,000 on the outstanding notes payable balance plus all interest due and payable to December 31 (included in interest expense $3,500, above). Accounts payable at December 31,2017, includes amounts due suppliers (see above) plus other accounts payable of $7,200. Unpaid income taxes at December 31 will be $5,000.Required: Prepare the following for 2017: 1)Budgeted statement of cost of goods sold (15 marks)2)Budgeted multiple-step income statement(25 marks)3)Retained earnings statement for 2017(15 marks)4)Budgeted classified balance sheet at December 31,2017(25 marks)5)Proof of budgeted cash balance at December 31, 2017 (20 marks)Note: Do Notprovide any additional budgets in your answer. Only submit the answers for above five requirements. Question Two (40 Marks)a)Discussall the primary benefits of budgeting to the CEO of Comfort Furniture Pty Ltd. Provide detailed information (25marks).b)How may a Comfort Furniture's budget report for the second quarter differ from the first quarter.Provide detailed explanation. (15marks).