CH 22 4

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, 2043, is prepared by the Accounting Department of Regina Soap Co.: Cash $119,700 Accounts Receivable 232,200 Finished Goods 48,800 Work in Process 32,500 Materials 53,400 Prepaid Expenses 3,900 Plant and Equipment 603,300 Accumulated Depreciation-Plant and Equipment $259,400 Accounts Payable 188,900 Common Stock, $10 par 350,000 Retained Earnings 295,500 $1,093,800 $1,093,800 Factory output and sales for 20Y4 are expected to total 30,000 units of product, which are to be sold at $100 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 Variable (Total for Year) (Per Unit Sold) Cost of goods manufactured and sold: Direct materials $25 Direct labor 8 Factory overhead: Depreciation of plant and equipment $30,000 Other factory overhead 9,300 4.5 Selling expenses: Sales salaries and commissions 107,700 12.5 Advertising 90,000 Miscellaneous selling expense 7,800 2 Administrative expenses: Office and officers salaries 70,800 6.5 Supplies 3,600 1 Miscellaneous administrative expense 1,900 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 $254,700 on 2014 taxable income will be paid during 2014. 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 $163,000 cash in May. Required: 1. Prepare a budgeted income statement for 2014. Regina Soap Co. Budgeted Income Statement For the Year Ending December 31, 20Y4 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 Qol DOO 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, 20Y4. Regina Soap Co. Budgeted Balance Sheet December 31, 2014 Assets Current assets: Cash $ Accounts receivable Inventories: Finished goods Work in process III I Materials Prepaid expenses Total current assets Property, plant, and equipment: Plant and equipment $ I ll Less accumulated depreciation Total assets Liabilities Current liabilities: Accounts payable Stockholders' Equity Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $