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, 20Y4, the following tentative trial balance as of December 31, 20Y3, is prepared by the Accounting Department of Regina Soap Co.:

Cash	$99,300
Accounts Receivable	179,700
Finished Goods	37,700
Work in Process	25,200
Materials	41,300
Prepaid Expenses	3,100
Plant and Equipment	475,600
Accumulated DepreciationPlant and Equipment			$204,500
Accounts Payable			119,900
Common Stock, $10 par			350,000
Retained Earnings			187,500
	$861,900		$861,900

Factory output and sales for 20Y4 are expected to total 23,000 units of product, which are to be sold at $90 per unit. The quantities and costs of the inventories at December 31, 20Y4, 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	_		$23
Direct labor	_		7
Factory overhead:
Depreciation of plant and equipment	$23,000		_
Other factory overhead	7,100		4
Selling expenses:
Sales salaries and commissions	82,600		11.5
Advertising	69,000		_
Miscellaneous selling expense	6,000		2
Administrative expenses:
Office and officers salaries	54,300		5.5
Supplies	2,800		1
Miscellaneous administrative expense	1,400		1.5

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 $164,200 on 20Y4 taxable income will be paid during 20Y4. 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 $128,000 cash in May.

Required:

Question Content Area

1. Prepare a budgeted income statement for 20Y4.

Regina Soap Co. Budgeted Income Statement For the Year Ending December 31, 20Y4

Gross profitIncome before income taxInterest expenseInterest revenueSales			$- Select -
Cost of goods sold:
Direct materialsIncome tax expenseMiscellaneous selling expenseOffice and officers salariesSupplies		$- Select -
Direct laborGross profitIncome tax expenseMiscellaneous administrative expenseSales		- Select -
AdvertisingFactory overheadIncome tax expenseSales salaries and commissionsSales		- Select -
Cost of goods sold
Gross profit			$
Operating expenses:
Selling expenses:
Income tax expenseNet lossSales salaries and commissionsSalesSupplies	$- Select -
AdvertisingDirect laborDirect materialsFactory overheadNet loss	- Select -
Gross profitIncome tax expenseMiscellaneous selling expenseSalesSupplies	- Select -
Total selling expenses		$
Administrative expenses:
AdvertisingIncome tax expenseOffice and officers salariesSales salaries and commissionsSales	$- Select -
AdvertisingDirect materialsFactory overheadNet lossSupplies	- Select -
Gross profitIncome tax expenseMiscellaneous administrative expenseMiscellaneous selling expenseSales	- Select -
Total administrative expenses
Total operating expenses
Income before income tax			$
AdvertisingDirect materialsFactory overheadIncome tax expenseSupplies			- Select -
Gross profitNet incomeNet loss			$- Select -

Question Content Area

2. Prepare a budgeted balance sheet as of December 31, 20Y4.

Regina Soap Co. Budgeted Balance Sheet December 31, 20Y4
Assets
Current assets:
Accounts payableCashCommon stockMaterialsPlant and equipment		$
Accounts payableAccounts receivablePlant and equipmentRetained earningsWork in process
Inventories:
Accumulated depreciationCashCommon stockFinished goodsPlant and equipment	$
Accounts payableCashPlant and equipmentPrepaid expensesWork in process
Accounts payableCashCommon stockMaterialsPlant and equipment
Accounts payablePlant and equipmentPrepaid expensesRetained earningsWork in process
Total current assets
Property, plant, and equipment:
Accounts receivableCashCommon stockMaterialsPlant and equipment		$
Less accounts payableLess accumulated depreciationLess prepaid expensesLess retained earningsLess work in process
Total assets			$
Liabilities
Current liabilities:
Accounts payableCashCommon stockMaterialsPlant and equipment			$
Stockholders' Equity
Accounts payableAccumulated depreciationCommon stockPlant and equipmentPrepaid expenses		$
Accumulated depreciationCashPlant and equipmentPrepaid expensesRetained earnings
Total stockholders equity
Total liabilities and stockholders equity			$