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 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 percent income tax rate. The actual income statement for last year follows:

Required

Prepared a budgeted income statement and balance sheet.

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PANTHER CORPORATION Expeoted Aooount Balanoee for Deoember 31, Year 2 Cash Accounts receivable Inventory (January 1, Year 2) Plant and equipment. Accumulated depreciation Accounts payable Notes payable (due within one year). Accrued payables Common stock Retained eamings Sales.. Other income- Manufacturing costs. 4,800 320,000 192,000 520,000 .. . $164,000 180,000 200,000 93,000 280,000 432,800 2,400,000 36,000 - . . Materials. Direct labor 852,000 872,000 520.000 20,000 31,000 Depreciation Marketing Commissions - Salaries. - Promotion and advertising.... 80,000 64.000 180,000 Administrative Travel . Office costs Income taxes.. -- 64,000 10,000 36,000 Dividends 20.000 $3,785,800 $3,785,800 PANTHER CORPORATION Statement of Inoome and Retained Earningo For the Budget Year Ended Deo·mber 31, Y ear 1 Revenues $1,800,000 60,000 S1,860,000 Other income. Expenses Cost of goods sold $528,000 540,000 324,000 48,000 $1,440,000 Beginning inventory. . ..192,000 $1,632,000 Ending inventory192,000 Materials.. Direct labor Variable overhead- ····· Fixed overhead Selling SalaneS.-...- Commissions Promotion and advertising 54,000 60,000 126,000 240,000 General and administrative S 56,000 8,000 32,000 Salaries.... Travel. Office costs . . . . 96,000 33,600 1809,600 50,400 402,400 452,800 20,000 432,800 Income taxes --.-.. - Operating profit Beginning retained earnings Less dividends.. Ending retained earnings