As a preliminary to requesting budget estimates of sales, costs, and expenses fo

Question

As a preliminary to requesting budget estimates of sales, costs, and expenses for the fiscal year beginning January 1, 20Y9, the following tentative trial balance as of December 31, 20Y8, is prepared by the Accounting Department of Regina Soap Co.:

Factory output and sales for 20Y9 are expected to total 25,000 units of product, which are to be sold at $110 per unit. The quantities and costs of the inventories at December 31, 20Y9, 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:

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 $242,200 on 20Y9 taxable income will be paid during 20Y9. 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 $145,000 cash in May.

Required:

1. Prepare a budgeted income statement for 20Y9.

Feedback

Use information from the expected sales, cost of goods, and selling and administrative expenses.

Learning Objective 4, Learning Objective 5.

2. Prepare a budgeted balance sheet as of December 31, 20Y9.

Cash $103,800 Accounts Receivable 181,700 Finished Goods 38,200 Work in Process 25,400 Materials 41,800 Prepaid Expenses 3,100 Plant and Equipment 538,700 Accumulated Depreciation—Plant and Equipment $231,600 Accounts Payable 136,900 Common Stock, $10 par 350,000 Retained Earnings 214,200 $932,700 $932,700

Explanation / Answer

Part 1 - Income statement

Regina soap co.

Budgeted Income Statement

For the year ending December 31,20Y9

Part 2 - Budgeted Balance sheet

Regina soap co.

Budgeted Balance sheet

December 31, 20Y9

Working Note 1

Cash Balance

Working Note 2 - Retained earnings Balance

Particulars Sales (25000 * $110) $2750000 Cost of goods sold:- Direct Material (25000 * $28) $700000 Direct labour (25000 * $8.5) $212500 Factory overhead (25000 * $5) + $25000 + $7800 $157800 Cost of goods sold $1070300 Gross Profit $1679700 Operating expenses Selling expenses Sales salaries and commission (25000 * $14) + $89800 $439800 Advertising $75000 Miscellaneous selling expenses (25000 * $2) + $6500 $56500 Total selling expenses $571300 Administrative expenses Office and officers salaries (25000 * $7) + $59000 $234000 Supplies (25000 * $1) + $3000 $28000 Miscellaneous administrative expenses (25000 * $1.5) + $1600 $39100 Total administrative expenses $301100 Total operating expenses $872400 Income before Income tax $807300 Income tax expenses $242200 Net Income $565100

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