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    Week 6 Problem
    Proforma Statements
    NOTE: It is expected that this problem will be completed using an Excel spreadsheet using formulas. Please see the Excel Tutorial that is available under the course home tab.

    The Duncan Company has just completed a number of budgets for the coming year. The cost of goods manufactured schedule, the proforma income statement and the balance sheet still have to be completed. The following information is available:

    Prior year Balance Sheet:
    Cash $35,000 Accounts Payable $98,000
    Accounts Receivable 45,000 Other Current Liabilities 39,000
    Materials Inventory 35,000 Income Taxes Payable 21,000
    WIP Inventory 25,000
    Finished Goods Inventory 32,000 Long-Term Debt 250,000
    Prepaid Expenses 15,000
    Plant and Equipment 450,000 Common Stock 100,000
    Accumulated Depreciation (120,000) Retained Earnings 27,000
    Other Assets 18,000
    Total Assets $535,000 Total Liab. & Equity $535,000

    Information from recent budgets for the coming year:
    1. Projected sales are $1,800,000 (12,690 units)
    2. Projected direct material purchases are $500,000
    3. Projected direct material usage is $495,000
    4. Projected direct labor expense is $400,000
    5. Projected overhead is $380,000
    6. Projected selling expenses are $120,000
    7. Projected administrative expenses are $300,000
    8. Projected cash collections are $1,785,000
    9. Projected payments for materials (accounts payable) are $520,000
    10. Projected payments for other operating expenses (other current liabilities) are $1,130,000
    11. Projected depreciation expense is $55,000 and is already included in mfg overhead

    Additional information that is available:
    1. The expected tax rate is 35%
    2. The company is planning a stock issue of $25,000
    3. Income taxes are paid 3 months after the year-end
    4. The company anticipates purchasing a new patent for $10,000 during the year.
    5. WIP inventory is expected to decrease by $2,000
    6. Finished goods inventory is expected to increase by $8,000
    7. Due to insurance rate increases, it is expected that prepaid expenses will increase by $3,000

    Investment information:
    1. A purchase of additional equipment for $75,000 is expected on January 1st.
    2. The purchase will be made using $50,000 cash and long-term debt will be increased by $25,000

    Long-Term Debt information:
    1. All long-term debt will have an 8% annual rate.
    2. A payment of $50,000 including BOTH principle and interest will be made on December 31st.

    Required: Prepare a cost of goods manufactured schedule, a proforma income statement and proforma balance sheet.

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    Solution Summary

    The solution explains how to prepare a cost of goods manufactured schedule, a proforma income statement and proforma balance sheet.