I.

Introduction
The management of Fahning Manufacturing Company is known to prepare a budget of
expected operations every year. The budget comprises of the projected balance sheet as of the end of
the year and the projected income statement such that these financial statements are accomplished
through the integration of the meticulous computations of each departments. To that end, the
finalized and integrated budget of operations will serve as a reliable entry to arrive at a profitable goal
in the coming year’s operation.

II. Statement of the Problem

Much attention has been drawn in preparation for the assessment of the coming year’s
financial operations, the 1993 budget, after the projected statements as of November 1992 were
compiled comprehensively. The study aims to discuss the principal differences of the 1993 estimates
with those of 1992 figures in pursuit to extensively compare the performances of each year’s
operations. That is to say, in what respects are the transactions operated in 1993 are expected to be
better than those statements projected as of 1992.

III. Objectives of the Study

The objective of this study is to create financial statements on the projected operations of
Fahning Manufacturing Company for the year 1993. Specific objectives are as follows:
1. To create journal entries for projected transactions of the year 1993;
2. To create a projected cost of goods manufactured and sold statement for the year 1993;
3. To create a projected income statement for the year 1993;
4. To create a projected balance sheet as of the year ending December 31, 1993;
5. To compare and analyze operations for the year 1992 and 1993.
IV. Analysis and Solution
Objective 1: Journalizing Entries
 Figure 1. Journal Entries of Projected Transactions for the Year 1993
The figure above depicts the projected transactions of the company in the year 1993. The
transactions involve accounts seen in four financial statements, namely cost of goods manufactured
and sold statement, income statement, statement of retained earnings, and balance sheet. Journal
entries 2 to 5 are seen in the cost of goods manufactured and sold statement although some entries
(accumulated depreciation, cash, and prepaid insurance) are noted in the balance sheet.

Objective 2: Creating a cost of goods and sold statement

 Figure 2. Cost of Goods Manufactured and Sold Statement for the Year 1993
The table above indicates the projected cost of goods and sold statement for the year 1993.
The value for cost of goods sold was already indicated in journal entry number 5 (recall: Figure 1);
however, certain values (e.g. work in process, ending) were yet to be defined. These yet to be defined
values are required in the balance sheet; the acquisition of unknown values of some accounts affect
more than one financial statement.

Objective 3: Creating an Income Statement and Statement of Retained Earnings

 Figure 3. Projected Income Statement for the year 1993
The figure above presents the projected income statement of the company for the year ending
1993. The value for the cost of goods sold was obtained from statement of cost of goods
manufactured and sold. The values for the sales and expenses can be taken from the journal entries
stated in Figure 1. Through the process of increasing and decreasing the initial value of sales with
other costs and expenses, it was found that the net income after tax to be 589,776.00 dollars.

Figure 4. Statement of Retained Earnings for the Year 1993

The figure above shows the statement of retained earnings of the company for the year ending
1993. The dividends value can be found in Figure 1, journal entry number 10. The “Retained Earnings,
Beginning” is the retained earnings taken from the year ending 1992. The “NIAT” refers to the net
income after tax of the year 1993 which can be seen in Figure 3, the income statement. The retained
earnings for the year 1993 was found to be 1,383,336.00 dollars.
Objective 4: Creating a Balance Sheet

Figure 5. Balance Sheet for the Year Ending 1993

The figure above presents the balance sheet of the company for the year 1993. Certain values
found in the financial statement were obtained from the balance sheet of the year 1992. It can be
observed that the assets and liabilities of the company are equal, at value of 3,085,936.00 dollars. The
accounts payable of the company was found to be -68,040.00 dollars. There appears to be an
occurence of overpayment or something of that matter. The amount for the work in process
inventory, finished goods inventory, and supplies inventory for the year 1993 are taken from the
statements of cost of goods manufactured and sold such that these values were initially not found in
the journal entries. The process of inference has to be utilized to obtain said values.

Objective 5: Comparison of Values for the Year 1992 and 1993

Kindly refer to the conclusion and recommendation portion of this paper.
V. Conclusion and Recommendation
 One of the most effective ways to compare the financial performance of a business is to perform
a ratio analysis for each year's operation, in this case for years 1992 and 1993. In regards to the balance
sheets as of the years 1992 and 1993, the return on assets ratio was computed with the following
estimated ratios 0.037 and 0.19 respectively. With that in mind, the operations for the year 1993 came
out more successful in allocating the assets to generate the most of the business's earnings. In regards
to the income statement of each year's operation, the net profit ratios for years 1992 and 1993 are
0.046 and 0.33 respectively. Given that the net profit ratio is calculated by dividing the profit after
interest by the total sales revenue, the ratio serves as a reliable measure in determining the remaining
profit of the business after all the costs of production, not to mention the expenses and taxes incurred
for the year. Having said that, the budget of operation for the year 1993 was higher than ever with a
net profit ratio of 0.33 as opposed to that of 1992 with only 0.046.