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, 2017, the following tentative trial balance as of December 31, 2016, is prepared by the Accounting Department of Webster Publishing Co.:

Cash	$117,500
Accounts Receivable	220,900
Finished Goods	46,400
Work in Process	30,900
Materials	50,800
Prepaid Expenses	3,800
Plant and Equipment	558,100
Accumulated DepreciationPlant and Equipment			$240,000
Accounts Payable			210,000
Common Stock, $10 par			250,000
Retained Earnings			328,400
	$1,028,400		$1,028,400

Factory output and sales for 2017 are expected to total 28,000 units of product, which are to be sold at $110 per unit. The quantities and costs of the inventories at December 31, 2017, 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	$28,000		_
Other factory overhead	8,700		5
Selling expenses:
Sales salaries and commissions	100,500		14
Advertising	84,000		_
Miscellaneous selling expense	7,300		2
Administrative expenses:
Office and officers salaries	66,100		7
Supplies	3,400		1
Miscellaneous administrative expense	1,800		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 $271,300 on 2017 taxable income will be paid during 2017. 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 $151,000 cash in May.

Required:

• Prepare a budgeted income statement for 2017.
• Prepare a budgeted balance sheet as of December 31, 2017.

Part 1: Budgeted Income Statement

1. Prepare a budgeted income statement for 2017.

Webster Publishing Co.

Budgeted Income Statement

For the Year Ending December 31, 2017

Cost of goods sold: Cost of goods sold Gross profit Operating expenses: Selling expenses: Total selling expenses Administrative expenses: Total administrative expenses Total operating expenses Income before income tax Cash Accounts receivable Inventories: Finished goods Work in process Materials Prepaid expenses Total current assets Property, plant, and equipment: Plant and equipment Less accumulated depreciation Total assets Liabilities Current liabilities: Accounts payable Stockholders' Equity Common stock Retained earnings Total stockholders' equity