Question

3. 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, 20Y9, the following tentative trial balance as of December 31, 20Y8, is prepared by the Accounting Department of Regina Soap Co.:

   Cash	$111,000
   Accounts Receivable	196,500
   Finished Goods	41,300
   Work in Process	27,500
   Materials	45,200
   Prepaid Expenses	3,300
   Plant and Equipment	576,100
   Accumulated Depreciation—Plant and Equipment			$247,700
   Accounts Payable			157,200
   Common Stock, $10 par			350,000
   Retained Earnings			246,000
   	$1,000,900		$1,000,900

   Factory output and sales for 20Y9 are expected to total 27,000 units of product, which are to be sold at $90 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 (Total for Year)		Variable (Per Unit Sold)
   Cost of goods manufactured and sold:
   Direct materials	_		$23
   Direct labor	_		7
   Factory overhead:
   Depreciation of plant and equipment	$27,000		_
   Other factory overhead	8,400		4
   Selling expenses:
   Sales salaries and commissions	96,900		11.5
   Advertising	81,000		_
   Miscellaneous selling expense	7,000		2
   Administrative expenses:
   Office and officers salaries	63,700		5.5
   Supplies	3,200		1
   Miscellaneous administrative expense	1,700		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 $192,800 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 $156,000 cash in May.

   Required:

   1. Prepare a budgeted income statement for 20Y9.

   Regina Soap Co.
   Budgeted Income Statement
   For the Year Ending December 31, 20Y9
   Sales			$
   Cost of goods sold:
   		$
   Cost of goods sold
   Gross profit			$
   Operating expenses:
   Selling expenses:
   	$
   Total selling expenses		$
   Administrative expenses:
   	$
   Total administrative expenses
   Total operating expenses
   Income before income tax			$
   			$

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

   Regina Soap Co. Budgeted Balance Sheet December 31, 20Y9
   Assets
   Current assets:
   Cash		$
   Inventories:
   	$
   Total current assets			$
   Property, plant, and equipment:
   		$
   Total property, plant, and equipment
   Total assets			$
   Liabilities
   Current liabilities:
   			$
   Stockholders' Equity
   		$
   Total stockholders’ equity
   Total liabilities and stockholders’ equity			$

Answer 1

Answer is given below