Panther Corporation appeared to be experiencing a good year. Sales in the first
ID: 2450495 • Letter: P
Question
Panther Corporation appeared to be experiencing a good year. Sales in the first quarter were one-third ahead of last year, and the sales department predicted that this rate would continue throughout the entire year. The controller asked Janet Nomura, a summer accounting intern, to prepare a draft forecast for the year and to analyze the differences from last year's results. She based the forecast on actual results obtained in the first quarter plus the expected costs of production to be completed in the remainder of the year. She worked with various department heads (production, sales, and so on) to get the necessary information. The results of these efforts follow:
Adjustments for the change in inventory and for income taxes have not been made. The scheduled production for this year is 450,000 units, and planned sales volume is 400,000 units. Sales and production volume was 300,000 units last year. The company uses a full-absorption costing and FIFO inventory system and is subject to a 40 percent income tax rate. The actual income statement for last year follows:
Panther Corporation appeared to be experiencing a good year. Sales in the first quarter were one-third ahead of last year, and the sales department predicted that this rate would continue throughout the entire year. The controller asked Janet Nomura, a summer accounting intern, to prepare a draft forecast for the year and to analyze the differences from last year's results. She based the forecast on actual results obtained in the first quarter plus the expected costs of production to be completed in the remainder of the year. She worked with various department heads (production, sales, and so on) to get the necessary information. The results of these efforts follow:
Explanation / Answer
Panther Corporation Budgeted Income Description Amount Amount Revenues Sales $24,00,000 Other Income $36,000 $24,36,000 Expenses Cost of goods sold Materials $8,52,000 Direct labor $8,72,000 Variable overhead $5,20,000 Depreciation $20,000 Fixed overhead $31,000 $22,95,000 Beginning Inventory $1,92,000 $24,87,000 Ending Inventory $1,92,000 $22,95,000 Marketing Commissions $80,000 Salaries $64,000 Promotion & Advertising $1,80,000 $3,24,000 Administrative Salaries $64,000 Travel $10,000 Office costs $36,000 $1,10,000 Dividends $20,000 Profit before tax -$2,93,000 Tax @ 40% $0 Profit after tax -$2,93,000 Panther Corporation Balance Sheet Cash $4,800 Accounts receivable $3,20,000 Inventory $1,92,000 Plant and equipment $5,20,000 Accumulated depreciation $1,84,000 Accounts payable $1,80,000 Notes payable (due within one year) $2,00,000 Accrued payables $53,000 Common stock $2,80,000 Retained earnings $1,39,800 $10,36,800 $10,36,800
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