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Budgeted income statement and balance sheet

As a preliminary to requesting budget estimates of sales, costs, and expenses for the fiscal year beginning January $1,20$Y$9,$ the following tentative trial balance as of December $31,20$Y$8,$ is prepared by the Accounting Department of Regina Soap Co$.$:

Account Title Debit Balance Credit Balance

Cash $$101,600$

Accounts Receivable $172,700$

Finished Goods $36,300$

Work in Process $24,200$

Materials $39,700$

Prepaid Expenses $2,900$

Plant and Equipment $515,100$

Accumulated Depreciation$$Plant and Equipment $$221,500$

Accounts Payable $164,200$

Common Stock, $$10$ par $250,000$

Retained Earnings $256,800$

Total $$892,500$ $$892,500$

Factory output and sales for $20$Y$9$ are expected to total $24,000$ units of product, which are to be sold at $$100$ per unit. The quantities and costs of the inventories at December $31,20$Y$9,$ 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

Line Item Description Fixed

$($Total for Year$)$ Variable

$($Per Unit Sold$)$

Cost of goods manufactured and sold:

Direct materials $\_$ $$25$

Direct labor $\_8$

Factory overhead:

Depreciation of plant and equipment $$24,000\_$

Other factory overhead $7,4004\mathrm{.}5$

Selling expenses:

Sales salaries and commissions $86,20012\mathrm{.}5$

Advertising $72,000\_$

Miscellaneous selling expense $6,2002$

Administrative expenses:

Office and officers salaries $56,6006\mathrm{.}5$

Supplies $2,9001$

Miscellaneous administrative expense $1,5001\mathrm{.}5$

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 $$203,800$ on $20$Y$9$ taxable income will be paid during $20$Y$9.$ Regular quarterly cash dividends of $$1$ per share are expected to be declared and paid in March, June, September, and December on $25,000$ shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $$139,000$ cash in May.

Required:

Question Content Area

$1.$ Prepare a budgeted income statement for $20$Y$9.$

Regina Soap Co$.$

Budgeted Income Statement

For the Year Ending December $31,20$Y$9$

Line Item Description Amount Amount Amount

Sales

$Sales

$2,400,000$

Cost of goods sold:

Direct materials

$Direct materials

$600,000$

Direct labor

Direct labor

$192,000$

Factory overhead

Factory overhead

$139,400$

Cost of goods sold Cost of goods sold

$-931,400$

Gross profit $Gross profit

$1,468,600$

Operating expenses:

Selling expenses:

Sales salaries and commissions

$Sales salaries and commissions

$386,200$

Advertising

Advertising

$72,000$

Miscellaneous selling expense

Miscellaneous selling expense

$54,200$

Total selling expenses $Total selling expenses

$512,400$

Administrative expenses:

Office and officers salaries

$Office and officers salaries

$212,600$

Supplies

Supplies

$26,900$

Miscellaneous administrative expense

Miscellaneous administrative expense

$37,500$

Total administrative expenses Total administrative expenses

$277,000$

Total operating expenses Total operating expenses

$-789,400$

Income before income tax $Income before income tax

$679,200$

Income tax expense

Income tax expense

$-203,800$

Net income

$Net income

$475,400$

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