Chapter 21, Problem 21.5APR

Budgeted income statement and balance sheet

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

Cash	$ 85,000
Accounts Receivable........................................	125,600
Finished Goods............................................	69,300
Work in Process............................................	32,500
Materials..................................................	48,900
Prepaid Expenses..........................................	2,600
Plant and Equipment.......................................	325,000
Accumulated Depreciation—Plant and Equipment...........		$156,200
Accounts Payable..........................................		62,000
Common Stock. $10 par....................................		180,000
Retained Earnings..........................................		290,700
	$688,900	$688,900

Factory output and sales for 20Y9 are expected to total 200,000 units of product, which are to be sold at $5.00 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:

	Estimated Costs and Expenses
	Fixed	Variable
	(Total for Year)	(Per Unit Sold)
Cost of goods manufactured and sold:
Direct materials..................................		$1.10
Direct labor......................................		0.65
Factory overhead:
Depreciation of plant and equipment...........	$40,000	—
Other factory overhead........................	12,000	0.40
Selling expenses:
Sales salaries and commissions....................	46,000	0.45
Advertising......................................	64,000	—
Miscellaneous selling expense...................	6,000	0 25
Administrative expenses:
Office and officers salaries........................	72,400	0.12
Supplies.........................................	5,000	0.10
Miscellaneous administrative expense.............	4,000	0.05

Balances of accounts receivable, prepaid expenses, anti accounts payable at the end of the year are not expected to differ significantly from the beginning balances. Federal income tax of $30,000 on 20Y9 taxable income will be paid during 20Y9. Regular quarterly cash dividends of $0.15 per share are expected to be declared and paid in March, June. September, and December on 18,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $75,000 cash in May.

Instructions

1. 1. Prepare a budgeted income statement for 20Y9.
2. 2. Prepare a budgeted balance sheet as of December 31, 20Y9, with supporting calculations.