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

Pendleton Company

Budgeted Income Statemen

For the Year Ending December 31, 2016

Sales ($1,500,000 × 1.04 × 1.06 ) 1,653,600

Less bad debts ($1,653,600 × 0.01) -33,072

Net sales                                            1,620,528

Cost of goods sold ($825,000 × 1.04 × 1.03) -883,740

Gross profit                                                       736,788

Operating expenses

* ([$375,000 - $25,000] × 1.10) + $25,000      -410,000

Net income                                                       326,788                                          

*Assuming depreciation is based on historical cost, the $25,000 of depreciation is not subject to the 10 percent price increase.

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