Jacob Long, the controller of Arvada Corporation, is preparing a sales budget for the upcoming year. The income statements for the last four quarters are as follows:| | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Total ||--------------------|---------------|----------------|---------------|----------------|-----------|| Sales Revenue | $186,000 | $216,000 | $226,000 | $276,000 | $904,000 || Cost of Goods Sold | 111,600 | 129,600 | 135,600 | 165,600 | 542,400 || Gross Profit | 74,400 | 86,400 | 90,400 | 110,400 | 361,600 || Selling & Administrative Expenses | 18,600 | 21,600 | 22,600 | 27,600 | 90,400 || Net Income | $55,800 | $64,800 | $67,800 | $82,800 | $271,200 |**Notes:**- Historically, the cost of goods sold is approximately 60% of sales revenue.- Selling and administrative expenses are about 10% of sales revenue.Fred Arvada, the CEO, expects sales next year to increase by 15% for each respective quarter compared to the previous year. However, Rita Banks, the VP of sales, estimates a 10% growth.**Required:**a. Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Arvada’s estimate.b. Prepare a pro forma income statement including quarterly budgets for the coming year using Ms. Banks’ estimate.**Instructions:** Complete this question by entering your answers in the tabs below.Tabs: Required A | Required B The task involves preparing pro forma income statements, which are estimated financial statements looking forward into the future. This exercise requires creating quarterly budgets for the coming year based on different estimates.### Required:- **a.** Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Arvada’s estimate.- **b.** Prepare a pro forma income statement including quarterly budgets for the coming year using Ms. Banks’ estimate.### Instruction:Complete this question by entering your answers in the tabs below.### Tab: Required A#### Table Description:The table consists of several columns and rows designed to display financial data:- **Columns:** First Quarter, Second Quarter, Third Quarter, Fourth Quarter, Total- **Rows:** - **Sales Revenue:** To be filled based on estimates. - **Cost of Goods Sold:** Currently marked as $0. - **Gross Profit:** Automatically calculated, currently marked as zero due to no data input. - **Selling & Administrative Expenses:** To be filled based on estimates. - **Net Income:** Calculates the total profit after expenses, currently marked as $0.**Navigation:** Buttons are provided to navigate between the requirements—a "Required A" and a "Required B" button. Additional navigation includes "Prev" and "Next" to move through the slides, noted as "4 of 5."### Note:This table's purpose is to lay out the financial expectations for each quarter and for the year as a whole, using inputs influenced by differing sales growth estimates provided by two individuals, Mr. Arvada and Ms. Banks.

Answered: Image /qna-images/answer/2e31fd04-ea0f-4f38-ad9a-54671b8fb68e.jpg

a. Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Arvada's estimate. b. Prepare a pro forma income statement including quarterly budgets for the coming year using Ms. Banks' estimate.

a. Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Arvada's estimate. b. Prepare a pro forma income statement including quarterly budgets for the coming year using Ms. Banks' estimate.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Cash budget

A cash budget is an estimate of an organization's cash flow for the future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future. If cash receipts are insufficient to cover future expenses, an organization may plan to obtain funds from other sources. After estimating the sales, purchase, and capital expenditure budgets for the year, management develops a cash budget. These budgets are created to ensure that an organization's cash flow is managed. It is important to note that only cash transactions are recorded when actual cash enters and exits an organization.

Question

Jacob Long, the controller of Arvada Corporation, is preparing a sales budget for the upcoming year. The income statements for the last four quarters are as follows:

| | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Total |
|--------------------|---------------|----------------|---------------|----------------|-----------|
| Sales Revenue | $186,000 | $216,000 | $226,000 | $276,000 | $904,000 |
| Cost of Goods Sold | 111,600 | 129,600 | 135,600 | 165,600 | 542,400 |
| Gross Profit | 74,400 | 86,400 | 90,400 | 110,400 | 361,600 |
| Selling & Administrative Expenses | 18,600 | 21,600 | 22,600 | 27,600 | 90,400 |
| Net Income | $55,800 | $64,800 | $67,800 | $82,800 | $271,200 |

**Notes:**

- Historically, the cost of goods sold is approximately 60% of sales revenue.
- Selling and administrative expenses are about 10% of sales revenue.

Fred Arvada, the CEO, expects sales next year to increase by 15% for each respective quarter compared to the previous year. However, Rita Banks, the VP of sales, estimates a 10% growth.

**Required:**

a. Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Arvada’s estimate.

b. Prepare a pro forma income statement including quarterly budgets for the coming year using Ms. Banks’ estimate.

**Instructions:** Complete this question by entering your answers in the tabs below.

Tabs: Required A | Required B

The task involves preparing pro forma income statements, which are estimated financial statements looking forward into the future. This exercise requires creating quarterly budgets for the coming year based on different estimates.

### Required:
- **a.** Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Arvada’s estimate.
- **b.** Prepare a pro forma income statement including quarterly budgets for the coming year using Ms. Banks’ estimate.

### Instruction:
Complete this question by entering your answers in the tabs below.

### Tab: Required A

#### Table Description:
The table consists of several columns and rows designed to display financial data:

- **Columns:** First Quarter, Second Quarter, Third Quarter, Fourth Quarter, Total
- **Rows:**
- **Sales Revenue:** To be filled based on estimates.
- **Cost of Goods Sold:** Currently marked as $0.
- **Gross Profit:** Automatically calculated, currently marked as zero due to no data input.
- **Selling & Administrative Expenses:** To be filled based on estimates.
- **Net Income:** Calculates the total profit after expenses, currently marked as $0.

**Navigation:** Buttons are provided to navigate between the requirements—a "Required A" and a "Required B" button. Additional navigation includes "Prev" and "Next" to move through the slides, noted as "4 of 5."

### Note:
This table's purpose is to lay out the financial expectations for each quarter and for the year as a whole, using inputs influenced by differing sales growth estimates provided by two individuals, Mr. Arvada and Ms. Banks.

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