Prepare a budgeted quarterly income statement in tabular form for the first quarter of 2017.

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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The Midwest Regional Division of Union Corp. has been requested to prepare a quarterly budgeted income statement for 2017. The regional manager expects that sales in the first quarter of 2017 will increase by 10% over the same quarter of the preceding year and will then increase by 5% for each succeeding quarter in 2017.

The corporate head office has requested that the regional manager maintain an inventory in dollars equal to 25% of the next quarter's sales. Quarterly purchases average 55% of quarterly sales. Budgeted ending inventory on December 31, 2016 is $176,000. Quarterly salaries are $20,000 plus 5% of sales. All salaries are classified as sales salaries. Other quarterly expenses are estimated to be as follows:

                Rent expense                                                            $24,000

                Depreciation on office equipment                             $12,000

                Utilities expense                                                           $3,600

                Miscellaneous expenses                                      2% of sales

The income statement for the first quarter of 2016 was as follows:

Income Statement

For the Quarter Ended March 31, 2016

 

 

Sales ......................................................................................................

 

$720,000

Cost of goods sold..................................................................................

 

  396,000

Gross profit.............................................................................................

Operating expenses

 

324,000

Sales salaries..................................................................................

$52,000

 

Rent expense..................................................................................

24,000

 

Depreciation....................................................................................

12,000

 

Utilities ............................................................................................

3,600

 

           Miscellaneous .................................................................................        12,800

Total operating expenses.........................................................          104,400 Net income .............................................................................................   $219,600

Instructions

Prepare a budgeted quarterly income statement in tabular form for the first quarter of 2017. (Show computations.)

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