Homework SoursePanther Corporation appeared to be experiencing a good year
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:
Adjustments for the change in inventory and for income taxes have not been made. The scheduled production for this year is 415,000 units, and planned sales volume is 365,000 units. Sales and production volume was 265,000 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:
Required:
| PANTHER CORPORATION Expected Account Balances for December 31, Year 2 | |||||
| Cash | $ | 6,100 | |||
| Accounts receivable | 333,000 | ||||
| Inventory (January 1, Year 2) | 318,000 | ||||
| Plant and equipment | 585,000 | ||||
| Accumulated depreciation | $ | 177,000 | |||
| Accounts payable | 193,000 | ||||
| Notes payable (due within one year) | 213,000 | ||||
| Accrued payables | 106,000 | ||||
| Common stock | 410,000 | ||||
| Retained earnings | 771,600 | ||||
| Sales revenue | 2,530,000 | ||||
| Other income | 62,000 | ||||
| Manufacturing costs | |||||
| Materials | 963,000 | ||||
| Direct labor | 987,000 | ||||
| Variable overhead | 629,000 | ||||
| Depreciation | 33,000 | ||||
| Other fixed overhead | 44,000 | ||||
| Marketing | |||||
| Commissions | 106,000 | ||||
| Salaries | 77,000 | ||||
| Promotion and advertising | 206,000 | ||||
| Administrative | |||||
| Salaries | 77,000 | ||||
| Travel | 16,500 | ||||
| Office costs | 49,000 | ||||
| Income taxes | — | ||||
| Dividends | 33,000 | ||||
| $ | 4,462,600 | $ | 4,462,600 | ||
Solution
PANTHER CORPORATION Budgeted Income Statement For the year ended December 31, Year 2 Revenue: Sales Revenue 2,530,000 Other Income 62,000 Total Revenue 2,592,000 Expenses: Cost of goods manufactured and sold: Materials 963,000 Direct labor 987,000 Variable Overhead 629,000 Fixed Overhead 77,000 Beginning Inventory 318,000 Ending Inventory (659,200) 2,314,800 Marketing Salaries 77,000 Commissions 106,000 Promotions and advertising 206,000 389,000 Administrative Salaries 77,000 Travel 16,500 Office Costs 49,000 142,500 Income taxes (credit) Total Expenses 2,846,300 Operating Profit(Loss) (254,300) PANTHER CORPORATION Budgeted Balance Sheet Budgeted December 31, Year 2 Current Assets Cash 6,100 Inventory 659,200 Accounts Receivable 333,000 Total Current Assets 998,300 Plant and Equipment 585,000 Less: Accu. Depreciation (177,000) 408,000 Total Assets 1,406,300 Current Liabilities Accounts Payable 193,000 Notes Payable 213,000 Accrued Payables 106,000 Total Current Liabilities 512,000 Shareholders\' Equity Common Stock 410,000 Retained Earnings 484,300 Total Shareholders\' Equity 894,300 Total liabilities and shareholders\' equity 1,406,300 Notes : Calculation of closing stock Units of opening stock Total Cost of goods manufactured - year 1 1,590,000 No of units produced 265,000 Cost per unit 6 So no of units of opening stock = 318000/5 = 53,000 units Units of closing stock Opening stock 53,000 No of units manufactured 415,000 no of units sold (365,000) Units of closing stock 103,000 Total cost of units manufactured 2,656,000 No of units produced 415,000 Cost per unit 6.40 No of units of closing stock 103,000 Value of closing stock 659,200
