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, 20Y9, the following tentative trial balance as of December 31, 20Y8, is prepared by the Accounting Department of Regina Soap Co.:

Cash	$102,000
Accounts Receivable	193,800
Finished Goods	40,700
Work in Process	27,100
Materials	44,600
Prepaid Expenses	3,300
Plant and Equipment	484,500
Accumulated DepreciationPlant and Equipment			$208,300
Accounts Payable			170,700
Common Stock, $10 par			250,000
Retained Earnings			267,000
	$896,000		$896,000

Factory output and sales for 20Y9 are expected to total 24,000 units of product, which are to be sold at $120 per unit. The quantities and costs of the inventories at December 31, 20Y9, 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
Direct labor	_		9.5
Factory overhead:
Depreciation of plant and equipment	$24,000		_
Other factory overhead	7,400		5.5
Selling expenses:
Sales salaries and commissions	86,200		15
Advertising	72,000		_
Miscellaneous selling expense	6,200		2.5
Administrative expenses:
Office and officers salaries	56,600		7.5
Supplies	2,900		1
Miscellaneous administrative expense	1,500		2

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 $261,400 on 20Y9 taxable income will be paid during 20Y9. 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 $131,000 cash in May.

Required:

1. Prepare a budgeted income statement for 20Y9.

Regina Soap Co.
Budgeted Income Statement
For the Year Ending December 31, 20Y9
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, 20Y9.

Regina Soap Co. Budgeted Balance Sheet December 31, 20Y9
Assets
Current assets:
Cash		$
Inventories:
Finished goods	$
Work in process
Materials
Prepaid expenses
Total current assets			$
Property, plant, and equipment:
Plant and equipment		$
Accumulated depreciation
Total property, plant, and equipment
Total assets			$
Liabilities
Current liabilities:
Accounts payable			$
Stockholders' Equity
Common stock		$
Retained earnings
Total stockholders equity
Total liabilities and stockholders equity			$

Feedback

Do not forget to include inventories of finished goods, work in process, and materials as assets in the balance sheet.

Calculate the ending retained earnings balance. Include the remaining assets, liabilities, and stockholders' equity.

Learning Objective 4, Learning Objective 5.