Budgeted Income Statement Pendleton Company, a merchandising company, is develop

Question

Budgeted Income Statement
Pendleton Company, a merchandising company, is developing its master budget for 2015. The income statement for 2014 is as follows:

The following are management’s goals and forecasts for 2015:

Required
Prepare a budgeted functional income statement for 2015.

Do not use negative signs with any of your answers.

Pendleton Company
Income Statement
For Year Ending December 31, 2014 Gross sales $1,500,000 Less: Estimated uncollectible accounts (30,000) Net sales 1,470,000 Cost of goods sold (825,000) Gross profit 645,000 Operating expenses (including $25,000 depreciation) (375,000) Net income $270,000

Explanation / Answer

1) Sales in 2015 = Sales in 2014*(1+increase in sales price)*(1+increase in sales volume)

= $1,500,000*1.06*1.04 = $1,653,600

2) Estimated uncollectible accounts = Sales in 2015*2%

= $1,653,600*2% = $33,072

3) Cost of goods sold in 2015 = COGS in 2014*(1+increase in sales volume)*(1+increase in cost of merchandise)

= $825,000*1.04*1.03 = $883,740

4) Operating expenses in 2014 except depreciation = Operating Expenses - Depreciation

= $375,000 - $25,000 = $350,000

Depreciation in 2015 = Depreciation in 2014 (because ompany uses straight line depreciation)

Depreciation in 2015 = $25,000

Operating expense except depreciation in 2015 = $350,000*1.10 = $385,000

Operating Expenses (including depreciation) in 2015 = $385,000+$25,000 = $410,000

Pendleton Company
Budgeted Income Statement
For the Year Ending December 31, 2015 Sales $1,653,600 Less: Estimated uncollectible accounts ($33,072) Net sales $1,620,528 Cost of goods sold ($883,740) Gross profit $736,788 Operating expenses ($410,000) Net income $326,788

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