80.2K

Verified Solution

Link Copied!

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.

PANTHER CORPORATION

Expected Account Balances for December 31, Year 2

Cash

$ 4,800

Accounts receivable

320,000

Inventory (January 1, year 2)

192,000

Plant and equipment

520,000

Accumulated depreciation

$ 164,000

Accounts payable

180,000

Notes payable (due within one year)

200,000

Accrued payables

93,000

Common stock

280,000

Retained earnings

432,800

Sales revenue

2,400,000

Other income

36,000

Manufacturing costs

Materials

852,000

Direct labor

872,000

Variable overhead

520,000

Depreciation

20,000

Other fixed overhead

31,000

Marketing

Commissions

80,000

Salaries

64,000

Promotion and advertising

180,000

Administrative

Salaries

64,000

Travel

10,000

Office costs

36,000

Income taxes

Dividends

20,000

$3,785,800

$3,785,800

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

Statement of Income and Retained Earnings

For the Budget Year Ended December 31, Year 1

Revenues

Sales revenue

$1,800,000

Other income

60,000

$1,860,000

Expenses

Cost of goods sold

Materials

$ 528,000

Direct labor

540,000

Variable overhead

324,000

Fixed overhead

48,000

$1,440,000

Beginning inventory

192,000

$1,632,000

Ending inventory

192,000

$1,440,000

Selling

Salaries

$ 54,000

Commissions

60,000

Promotion and advertising

126,000

240,000

General and administrative

Salaries

$ 56,000

Travel

8,000

Office costs

32,000

96,000

Income taxes

33,600

1,809,600

Operating profit

50,400

Beginning retained earnings

402,400

Subtotal

$ 452,800

Less dividends

20,000

Ending retained earnings

$ 432,800

Required

Prepared a budgeted income statement and balance sheet.

Answer & Explanation Solved by verified expert

See Answer