ACCT2102 Lecture Notes - Lecture 9: Cost Driver, Kaizen, Retained Earnings
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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, 20Y9, the following tentative trial balance as of December 31, 20Y8, is prepared by the Accounting Department of Regina Soap Co.:
| Cash | $108,400 | ||
| Accounts Receivable | 204,900 | ||
| Finished Goods | 43,000 | ||
| Work in Process | 28,700 | ||
| Materials | 47,100 | ||
| Prepaid Expenses | 3,500 | ||
| Plant and Equipment | 498,600 | ||
| Accumulated DepreciationâPlant and Equipment | $214,400 | ||
| Accounts Payable | 183,200 | ||
| Common Stock, $10 par | 250,000 | ||
| Retained Earnings | 286,600 | ||
| $934,200 | $934,200 |
Factory output and sales for 20Y9 are expected to total 25,000 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 | $25,000 | _ | ||
| Other factory overhead | 7,800 | 4 | ||
| Selling expenses: | ||||
| Sales salaries and commissions | 89,800 | 11.5 | ||
| Advertising | 75,000 | _ | ||
| Miscellaneous selling expense | 6,500 | 2 | ||
| Administrative expenses: | ||||
| Office and officers salaries | 59,000 | 5.5 | ||
| Supplies | 3,000 | 1 | ||
| Miscellaneous administrative expense | 1,600 | 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 $178,400 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 25,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $135,000 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 | |||
| $ | |||
| 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: | |||
| Inventories: | |||
| Total current assets | |||
| Property, plant, and equipment: | |||
| Total property, plant, and equipment | |||
| Total assets | |||
| Liabilities | |||
| Current liabilities: | |||
| Stockholders' Equity | |||
| Total stockholdersâ equity | |||
| Total liabilities and stockholdersâ equity | |||
The balance sheet and the income statement for the year endedDecember 31, 2016 for Johnson Inc. follows. During 2016, cash of15,000 was paid for building and equipment, 10,000 was paid forretirement of notes payable, and $68,000.was paid for cashdividends. . During 2016, cash was received from issuance ofstock.
| Balance Sheet As of December, 31. | ||
2016 | 2015 | |
Cash | $ 25,000 | $ 20,000 |
Accounts receivable, net | 60,000 | 70,000 |
Inventory | 80,000 | 100,000 |
Land | 50,000 | 50,000 |
Building and equipment | 130,000* | 115,000 |
Accumulated depreciation | (85,000) | (70,000) |
Total assets | $260,000 | $285,000 |
Accounts payable | $ 30,000 | $ 35,000 |
Income taxes payable | 4,000 | 3,000 |
Wages payable | 5,000 | 3,000 |
Current notes payable | 50,000** | 60,000 |
Common stock | 110,000*** | 100,000 |
Retained earnings | 61,000 | 84,000 |
Total liabilities and stockholders's equity | $260,000 | $285,000 |
| Income Statement For the Year Ended December 31, 2016 | ||
Sales | $500,000 | |
Less expenses: | ||
Cost of goods sold | $330,000 | |
Selling and administrative expenses | 90,000 | |
(includes depreciation of $15,000) | ||
Interest expense | 5,000 | |
Total expenses | 425,000 | |
Income before taxes | $ 75,000 | |
Income tax expense | 30,000 | |
Net income | $ 45,000 | |
(Required) Prepare the statement of cash flows for 2016. Presentcash flows from operations using the indirect approach..
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, 2017, thefollowing tentative trial balance as of December 31, 2016, isprepared by the Accounting Department of Mesa Publishing Co.:
Cash | $ 26,000 | ||
Accounts Receivable | 23,800 | ||
Finished Goods | 16,900 | ||
Work in Process | 4,200 | ||
Materials | 6,400 | ||
Prepaid Expenses | 600 | ||
Plant and Equipment | 82,000 | ||
Accumulated DepreciationâPlant and Equipment | $ 32,000 | ||
Accounts Payable | 14,800 | ||
Common Stock, $1.50 par | 30,000 | ||
Retained Earnings | 83,100 | ||
$159,900 | $159,900 |
Factory output and sales for 2017 are expected to total 3,800units of product, which are to be sold at $120 per unit. Thequantities and costs of the inventories at December 31, 2017, areexpected to remain unchanged from the balances at the beginning ofthe year.
Budget estimates of manufacturing costs and operating expensesfor the year are summarized as follows:
Estimated Costs and Expenses | ||||
Fixed | Variable | |||
Cost of goods manufactured and sold: | ||||
Direct materials | _ | $30.00 | ||
Direct labor | _ | 8.40 | ||
Factory overhead: | ||||
Depreciation of plant and equipment | $ 4,000 | _ | ||
Other factory overhead | 1,400 | 4.80 | ||
Selling expenses: | ||||
Sales salaries and commissions | 12,800 | 13.50 | ||
Advertising | 13,200 | _ | ||
Miscellaneous selling expense | 1,000 | 2.50 | ||
Administrative expenses: | ||||
Office and officers salaries | 7,800 | 7.00 | ||
Supplies | 500 | 1.20 | ||
Miscellaneous administrative expense | 400 | 2.40 | ||
Balances of accounts receivable, prepaid expenses, and accountspayable at the end of the year are not expected to differsignificantly from the beginning balances. Federal income tax of$35,000 on 2017 taxable income will be paid during 2017. Regularquarterly cash dividends of $0.20 per share are expected to bedeclared and paid in March, June, September, and December on 20,000shares of common stock outstanding. It is anticipated that fixedassets will be purchased for $22,000 cash in May.
Required:
X
Part 1: Budgeted Income Statement
1. Prepare a budgeted income statement for2017.
Mesa Publishing Co. | |||
Budgeted Income Statement | |||
For the Year Ending December 31, 2017 | |||
$ | |||
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 | $ | ||
$ | |||
X
Part 2: Budgeted Balance Sheet
2. Prepare a budgeted balance sheet as ofDecember 31, 2017.
Mesa Publishing Co. | |||
Assets | |||
Current assets: | |||
Inventories: | |||
Total current assets | |||
Property, plant, and equipment: | |||
Total assets | |||
Liabilities | |||
Current liabilities: | |||
Stockholders' Equity | |||
Total stockholdersâ equity | |||
Total liabilities and stockholdersâ equity | |||
