Chapter 9, Problem 9.20E

In May 2017, the budget committee of Grand Stores assembles the following data in preparation of budgeted merchandise purchases for the month of June.

1. Expected sales: June $500,000. July $600,000.

2. Cost of goods sold is expected to be 75% of sales.

3. Desired ending merchandise inventory is 30% of the following (next) month’s cost of goods sold.

4. The beginning inventory at June 1 will be the desired amount.

Instructions

(a) Compute the budgeted merchandise purchases for June.

(b) Prepare the budgeted multiple-step income statement for June through gross profit.