13-58 Comprehensive Budget Plan
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% 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 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
Prepare a balance sheet.
13-58 Comprehensive Budget Plan
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% 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 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
Prepare a balance sheet.