ACCT556 Week 6 Homework Latest 2020 March

ACCT556 Budgeting

Week 6 HOMEWORK 

Problem Demonstration

Make sure to watch both problem demonstrations this week.

Pro Forma Income Statement

The pro forma income statement uses the sales budget, as well as all of the operating budgets, to develop the numbers that are needed to complete this important statement.

To help you gain the necessary skills to complete this week’s problem, you have been provided with a problem demonstration related to the preparation of the Pro Forma Income Statement.

It is suggested that you view this problem demonstration before attempting to do this week’s homework. Enjoy the demonstration!

Pro Forma Income Statements (Links to an external site.)

Transcript

Pro Forma Balance Sheet

The pro forma balance sheet is probably the most difficult budget statement to complete. If you break the development of this statement down into small parts, it is not quite as overwhelming a task as it first appears to be.

To help you gain the necessary skills to complete this week’s problems, you have been provided with a problem demonstration involving the development of a pro forma balance sheet.

It is suggested that you view this problem demonstration before attempting to do this week’s homework. Enjoy the demonstration!

Pro Forma Balance Sheet (Links to an external site.)

Transcript

Scenario: Pro Forma Statements

The Dawson Company has just completed a number of budgets for the coming year. The cost of goods manufactured schedule, the pro forma income statement, and the balance sheet still have to be completed.

The following information is available as 12/31/X8.

Prior Year Balance Sheet

Assets
Cash	$45,000
Accounts Receivable	$55,000
Materials Inventory	$40,000
Work-in-Process Inventory	$30,000
Finished Goods Inventory	$36,000
Prepaid Expenses	$20,000
Plant and Equipment	$500,000
Accumulated Depreciation	($140,000)
Other Assets	$22,000
Total Assets	$608,000

 

Liabilities and Equity

Accounts Payable	$103,000
Other Current Liabilities	$42,000
Income Taxes Payable	$25,000
Long-Term Debt	$300,000
Total Liabilities	$470,000
Common Stock	$100,000
Retained Earnings	$38,000
Total Equity	$138,000
Total Liabilities and Equity	$608,000

Information From Recent Budgets for the Coming Year

Projected sales are $2,080,000 (13,000 units).

Projected direct materials purchases are $525,000.

Projected direct materials usage is $510,000.

Projected direct labor expense is $420,000.

Projected overhead is $390,000.

Projected selling expenses are $130,000.

Projected administrative expenses are $310,000.

Projected cash collections are $1,805,000.

Projected payments for materials (accounts payable) are $550,000.

Projected payments for other operating expenses (other current liabilities) are $1,155,000.

Projected depreciation expense is $60,000 and is already included in manufacturing overhead.

Additional Information That Is Available

The expected tax rate is 20%.

The company is planning a stock issue of $50,000.

Income taxes are paid 3 months after year-end.

The company anticipates purchasing a new patent for $20,000 during the year.

Work-in-Process Inventory is expected to decrease by $2,500.

Finished Goods Inventory is expected to increase by $9,000.

Due to insurance rate increases, it is expected that prepaid expenses will increase by $5,000.

Investment Information

A purchase of additional equipment for $80,000 is expected on January 2, 20X9.

The purchase will be made using $50,000 cash and long-term debt will be increased by $30,000.

Long-Term Debt Information

All long-term debt will have a 9% annual rate.

A payment of $50,000 including both principal and interest will be made on December 31, 20X9.

Assignment Details

Important!

It is expected that the assignment will be completed using an Excel spreadsheet using formulas. Also, you may use Word for submitting your answers to questions this week.

Prepare a cost of goods manufactured schedule, a pro forma income statement, and pro forma balance sheet.