Question One (100 Marks) Comfort Furniture Pty Ltd manufactures and distributes stylish and practical furniture for hospitality industry in Australia. The companys balance sheet at December 31, 2016 is shown below: Comfort Furniture Balance Sheet December 31, 2016 Assets Current Assets Cash $7,500 Accounts receivable $73,500 Finished goods inventory (1500 units) $24,000 Total current assets $105,000 Property, plant and equipment Equipment $40,000 Less: Accumulated depreciation $10,000 $30,000 Total Assets: $135,000 Liabilities Notes payable $25,000 Accounts payable $45,000 Total Liabilities $70,000 Stockholders Equity Common stock $40,000 Retained earnings $25,000 Total stockholders equity $65,000 Total liabilities and stockholders equity $135,000 Budgeted data for the year 2017 includes the following: 2017 Quarter 4 Total Sales budget (8,000 units at $32) $76,800 $256,000 Direct materials used 17,000 62,500 Direct labour 12,500 50,900 Manufacturing overhead applied 10,000 48,600 Selling and administrative expenses 18,000 75,000 Additional Information: To meet sales requirements and to have 2,500 units of finished goods on hand at December 31, 2017, the production budget shows 9,000 required units of output. The total unit cost of production is expected to be $18. The company uses the first-in, first ACT502 Assignment, Semester 2, 2019 Page 3 out (FIFO) inventory costing method. Interest expense is expected to be $3,500 for the year. Income taxes are expected to be 40% of income before income taxes, in 2017, the company expects to declare and pay $8,000 cash dividends. The companys cash budget shows and expected cash balance of $5,880 at December 31, 2017. All sales and purchases are on account. It is expected that 60% of quarterly sales are collected in cash within the quarter and the remainder is collected in the following quarter. Direct materials purchased from suppliers and paid 50% in the quarter incurred and the remainder in the following quarter. Purchases in the fourth quarter were the same as the materials used. In 2017, the company expects to purchase additional equipment costing $9,000. $4,000 of depreciation expense on equipment is included in the budget data and split equally between manufacturing overhead and selling and administrative expenses. The company expects to pay $8,000 on the outstanding notes payable balance plus all interest due and payable to December 31 (included in interest expense $3,500, above). Accounts payable at December 31,2017, includes amounts due suppliers (see above) plus other accounts payable of $7,200. Unpaid income taxes at December 31 will be $5,000. Required: Prepare the following for 2017: 1) Budgeted statement of cost of goods sold (15 marks) 2) Budgeted multiple-step income statement (25 marks) 3) Retained earnings statement for 2017 (15 marks) 4) Budgeted classified balance sheet at December 31,2017 (25 marks) 5) Proof of budgeted cash balance at December 31, 2017 (20 marks) Note: Do Not provide any additional budgets in your answer. Only submit the answers for above five requirements. Question Two (40 Marks) a) Discuss all the primary benefits of budgeting to the CEO of Comfort Furniture Pty Ltd. Provide detailed information (25 marks). b) How may a Comfort Furnitures budget report for the second quarter differ from the first quarter. Provide detailed explanation. (15 marks).