Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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,

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, 20Y8, the following tentative trial balance as of December 31, 20Y7, is prepared by the Accounting Department of Mesa Publishing Co.:

Cash $ 26,000
Accounts Receivable 23,800
Finished Goods 16,900
Work in Process 4,200
Materials 6,400
Prepaid Expenses 600
Plant and Equipment 82,000
Accumulated DepreciationPlant and Equipment $ 32,000
Accounts Payable 14,800
Common Stock, $1.50 par 30,000
Retained Earnings 83,100
$159,900 $159,900

Factory output and sales for 20Y8 are expected to total 3,800 units of product, which are to be sold at $120 per unit. The quantities and costs of the inventories at December 31, 20Y8, 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 _ $30.00
Direct labor _ 8.40
Factory overhead:
Depreciation of plant and equipment $ 4,000 _
Other factory overhead 1,400 4.80
Selling expenses:
Sales salaries and commissions 12,800 13.50
Advertising 13,200 _
Miscellaneous selling expense 1,000 2.50
Administrative expenses:
Office and officers salaries 7,800 7.00
Supplies 500 1.20
Miscellaneous administrative expense 400 2.40

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 $35,000 on 20Y8 taxable income will be paid during 20Y8. Regular quarterly cash dividends of $0.20 per share are expected to be declared and paid in March, June, September, and December on 20,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $22,000 cash in May.

Required:

1. Prepare a budgeted income statement for 20Y8.

2. Prepare a budgeted balance sheet as of December 31, 20Y8.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Information Technology Auditing

Authors: James A. Hall

4th edition

1133949886, 978-1305445154, 1305445155, 978-1133949886

More Books

Students also viewed these Accounting questions