Angelini's has been in business since January of the current year. The company buys fresh pasta and resells it to large supermarket chains. The following information pertains to Angelini's first four months of operations: January February March April Purchases $50,000 40,000 55,000 25,000 Sales $80,000 60,000 90,000 40,000 Angelini's expects to open several new sales territories in May. In anticipation of increased volume, management forecasts May sales at $100,000. To meet this demand, purchases in May are budgeted at $60,000. The company maintains a gross profit margin of approximately 40 percent. All of Angelini's sales are on account. Due to strict credit policies, the company has no bad debt expense. The following collection performance is anticipated for the remainder of the year: Percent collected in month of sale Percent collected in month following sale Percent collected in the second month following sale 40% 50 10 Angelini's normally pays for 75 percent of its purchases in the month that the purchases are made. The remaining amount is paid in the following month. The company's fixed selling and administrative expenses average $10,000 per month. Of this amount, $3,000 is depreciation expense. Variable selling and administrative expenses are budgeted at 5 percent of sales. The company pays all of its selling and administrative expenses in the month that they are incurred. Angelini's debt service is $4,000 per month. Of this amount, approximately $3,000 represents interest expense, and $1,000 is payment on the principal. The company's tax rate is approximately 25 percent. Quarterly tax payments are made at the end of March, June, September, and December. Instructions: a. Prepare Angelini's budgeted income statement for May.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
icon
Concept explainers
Question
Angelini's has been in business since January of the current year. The company buys fresh pasta and
resells it to large supermarket chains. The following information pertains to Angelini's first four
months of operations:
Purchases
$50,000
January
February
March
April
40,000
55,000
25,000
Sales
$80,000
60,000
90,000
40,000
Angelini's expects to open several new sales territories in May. In anticipation of increased volume,
management forecasts May sales at $100,000. To meet this demand, purchases in May are budgeted
at $60,000. The company maintains a gross profit margin of approximately 40 percent.
All of Angelini's sales are on account. Due to strict credit policies, the company has no bad debt
expense. The following collection performance is anticipated for the remainder of the year:
Percent collected in month of sale
Percent collected in month following sale
Percent collected in the second month following sale
40%
50
10
Angelini's normally pays for 75 percent of its purchases in the month that the purchases are made.
The remaining amount is paid in the following month. The company's fixed selling and administrative
expenses average $10,000 per month. Of this amount, $3,000 is depreciation expense. Variable selling
and administrative expenses are budgeted at 5 percent of sales. The company pays all of its selling
and administrative expenses in the month that they are incurred.
Angelini's debt service is $4,000 per month. Of this amount, approximately $3,000 represents interest
expense, and $1,000 is payment on the principal. The company's tax rate is approximately 25 percent.
Quarterly tax payments are made at the end of March, June, September, and December.
Instructions:
a. Prepare Angelini's budgeted income statement for May.
Transcribed Image Text:Angelini's has been in business since January of the current year. The company buys fresh pasta and resells it to large supermarket chains. The following information pertains to Angelini's first four months of operations: Purchases $50,000 January February March April 40,000 55,000 25,000 Sales $80,000 60,000 90,000 40,000 Angelini's expects to open several new sales territories in May. In anticipation of increased volume, management forecasts May sales at $100,000. To meet this demand, purchases in May are budgeted at $60,000. The company maintains a gross profit margin of approximately 40 percent. All of Angelini's sales are on account. Due to strict credit policies, the company has no bad debt expense. The following collection performance is anticipated for the remainder of the year: Percent collected in month of sale Percent collected in month following sale Percent collected in the second month following sale 40% 50 10 Angelini's normally pays for 75 percent of its purchases in the month that the purchases are made. The remaining amount is paid in the following month. The company's fixed selling and administrative expenses average $10,000 per month. Of this amount, $3,000 is depreciation expense. Variable selling and administrative expenses are budgeted at 5 percent of sales. The company pays all of its selling and administrative expenses in the month that they are incurred. Angelini's debt service is $4,000 per month. Of this amount, approximately $3,000 represents interest expense, and $1,000 is payment on the principal. The company's tax rate is approximately 25 percent. Quarterly tax payments are made at the end of March, June, September, and December. Instructions: a. Prepare Angelini's budgeted income statement for May.
Expert Solution
steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Knowledge Booster
Budgeting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education