P9-5A 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.
1. Sales for May are expected to be $800,000.
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:
Sales salaries
|
$35,000 per month
|
Advertising
|
6% of monthly sales
|
Delivery expense
|
2% of monthly sales
|
Sales commissions
|
5% of monthly sales
|
Rent expense
|
$5,000 per month
|
Depreciation
|
$800 per month
|
Utilities
|
$600 per month
|
Insurance
|
$500 per month
|
5. Interest expense is $2,000 per
month. Income taxes are estimated to be 30% of income before income taxes.
Instructions
1. Prepare the merchandise
purchases budget for each month in columnar form.
(a) Purchases:
May $603,000
June $633,150
2. Prepare budgeted
multiple-step income statements for each month in columnar form. Show in the
statements the details of cost of goods sold.
(b) Net income:
May $36,470
June $39,830
