The budget committee of Suppar Company collects the following data for its San M

Question

The budget committee of Suppar Company collects the following data for its San Miguel Store in preparing budgeted income statements for May and June 2017.

prepare budgeted multi-step income statements for each month in columnar form.

sales, cost of goods sold, beginning inventory, purchases, cost of goods available for sale, ending inventory, cost of goods sold, gross profit, operating expenses, total operting expenses, income from operations, interest expense, income before income tax expense, income tax expense, net income / loss

1. Sales for May are expected to be $806,000. Sales in June and July are expected to be 5% higher than the preceding month. 2. Cost of goods sold is expected to be 75% of sales. 3. Company policy is to maintain ending merchandise inventory at 10% of the following month’s cost of goods sold. 4. Operating expenses are estimated to be as follows:

Explanation / Answer

Multiple Step Income Statement May June Sales 806000 846300 Less: Cost of Good Sold Opening Inventory 80600 84630 Puchases 608530 638956.5 Cost of Good Available for sale 689130 723586.5 Less: Ending Inventory 84630 88861.5 Cost of Good Sold 604500 634725 Gross Profit 201500 211575 Opearting Expnese Sales salaries $31,600 $31,600 Advertising 48360 50778 Delivery expense 16120 16926 Sales commissions 40300 42315 Rent expense $5,910 $5,910 Depreciation $880 $880 Utilities $610 $610 Insurance $520 $520 Total Operating Expenses $144,300 $149,539 Income from Operations $57,200 $62,036 Other Revenue and Expenses Less: Interest Expense 2000 2000 Income before Income Tax $55,200 $60,036 Income taxes 30% $16,560.0 $18,011 rounded off Net Income $38,640.0 $42,025 rounded off Working May June July Sales 806000 846300 888615 Cost of Good sold is 75% of sales 604500.0 634725.0 666461.3 Add: Ending Invnetory 10% of following month sale 84630 88861.5 Total Needs 689130.0 723586.5 Less: Opening Inventory 80600 84630 Puchases 608530.0 638956.5 May June Advertising 6 % of sales 48360 50778 Delivery expense 2 16120 16926 Sales commissions 5 40300 42315

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