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 $118,300

Accounts Receivable 222,400

Finished Goods 46,700

Work in Process 31,100

Materials 51,200

Prepaid Expenses 3,800

Plant and Equipment 539,400

Accumulated DepreciationPlant and Equipment $231,900

Accounts Payable 207,100

Common Stock, $10 par 250,000

Retained Earnings 323,900

$1,012,900 $1,012,900

Factory output and sales for 20Y4 are expected to total 27,000 units of product, which are to be sold at $110 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 _ $28

Direct labor _ 8.5

Factory overhead:

Depreciation of plant and equipment $27,000 _

Other factory overhead 8,400 5

Selling expenses:

Sales salaries and commissions 96,900 14

Advertising 81,000 _

Miscellaneous selling expense 7,000 2

Administrative expenses:

Office and officers salaries 63,700 7

Supplies 3,200 1

Miscellaneous administrative expense 1,700 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 $261,600 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 25,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $146,000 cash in May.