Question

In: Accounting

Budgeted Income Statement Pendleton Company, a merchandising company, is developing its master budget for 2015. The...

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

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


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

1. Selling prices will increase by 6 percent, and sales volume will increase by 4 percent.
2. The cost of merchandise will increase by 3 percent.
3. All operating expenses are fixed and are paid in the month incurred. Price increases for operating expenses will be 10 percent. The company uses straight-line depreciation.
4. The estimated uncollectibles are 2 percent of budgeted sales.


Required
Prepare a budgeted functional income statement for 2015.

Do not use negative signs with any of your answers.

Pendleton Company
Budgeted Income Statement
For the Year Ending December 31, 2015
Sales $Answer
Less: Estimated uncollectible accounts Answer
Net sales Answer
Cost of goods sold Answer
Gross profit Answer
Operating expenses Answer
Net income $Answer

Solutions

Expert Solution

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

Related Solutions

Exercise 20-34 Budgeted income statement LO P3 Fortune, Inc., is preparing its master budget for the...
Exercise 20-34 Budgeted income statement LO P3 Fortune, Inc., is preparing its master budget for the first quarter. The company sells a single product at a price of $25 per unit. Sales (in units) are forecasted at 37,000 for January, 57,000 for February, and 47,000 for March. Cost of goods sold is $12 per unit. Other expense information for the first quarter follows. Commissions 11 % of sales dollars Rent $ 22,000 per month Advertising 14 % of sales dollars...
Developing a Master Budget- Please answer the bottom bolded "ANSWERS" at the bottom. for a Merchandising...
Developing a Master Budget- Please answer the bottom bolded "ANSWERS" at the bottom. for a Merchandising Organization Peyton Department Store prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for 2010. PEYTON DEPARTMENT STORE Balance Sheet March 31, 2010 Assets Liabilities and Stockholders' Equity Cash $2,000 Accounts payable $26,000 Accounts receivable 25,000 Dividends payable 17,000 Inventory 30,000 Rent payable 1,000 Prepaid Insurance 2,000 Stockholders' equity 40,000 Fixtures 25,000 Total assets $84,000 Total liabilities...
Individual Case Study 2 Master Budget, Cash Budget and Budgeted Income Statement After two years study...
Individual Case Study 2 Master Budget, Cash Budget and Budgeted Income Statement After two years study at UCW, you finally graduate and start a job as Junior accountant at All About The Beard Inc.(AATB). Your manager is responsible for the national distribution of men grooming sets. Because of the new fashion style among current generation, the company has grown rapidly, and the prompt growth forces the management team to improve their efficiency and manage their production effectively. You have just...
Nadia Company, a merchandising company, prepares its master budget on a quarterly basis. The following data...
Nadia Company, a merchandising company, prepares its master budget on a quarterly basis. The following data has been assembled to assist in preparation of the master budget for the second quarter. a. As of March 31 (the end of the prior quarter), the company’s balance sheet showed the following account balances: Cash $9,000 Acct Receviable 48,000 Inventory 12,6000 Buildings & Equip. (net) 214,100 Acct. Payable 18,300 Common Stock 190,000 Retained Earnings 75,400 Totals 283,700 283,700 b. Sales for March total...
Nadia Company, a merchandising company, prepares its master budget on a quarterly basis. The following data...
Nadia Company, a merchandising company, prepares its master budget on a quarterly basis. The following data has been assembled to assist in preparation of the master budget for the second quarter. a. As of March 31 (the end of the prior quarter), the company’s balance sheet showed the following account balances: Cash $9,000 Acct Receviable 48,000 Inventory 12,6000 Buildings & Equip. (net) 214,100 Acct. Payable 18,300 Common Stock 190,000 Retained Earnings 75,400 Totals 283,700 283,700 b. Sales for March total...
Nadia Company, a merchandising company, prepares its master budget on a quarterly basis. The following data...
Nadia Company, a merchandising company, prepares its master budget on a quarterly basis. The following data has been assembled to assist in preparation of the master budget for the second quarter. a. As of March 31 (the end of the prior quarter), the company’s balance sheet showed the following account balances: Cash $9,000 Acct Receviable 48,000 Inventory 12,6000 Buildings & Equip. (net) 214,100 Acct. Payable 18,300 Common Stock 190,000 Retained Earnings 75,400 Totals 283,700 283,700 b. Sales for March total...
Nadia Company, a merchandising company, prepares its master budget on a quarterly basis. The following data...
Nadia Company, a merchandising company, prepares its master budget on a quarterly basis. The following data has been assembled to assist in preparation of the master budget for the second quarter. a. As of March 31 (the end of the prior quarter), the company’s balance sheet showed the following account balances: Cash $9,000 Accounts receivable        48,000 Inventory        12,600 Buildings and equipment (net)      214,100 Accounts payable          18,300 Common Stock        190,000 Retained earnings          75,400 Totals $283,700...
Nadia Company, a merchandising company, prepares its master budget on a quarterly basis. The following data...
Nadia Company, a merchandising company, prepares its master budget on a quarterly basis. The following data has been assembled to assist in preparation of the master budget for the second quarter. a. As of March 31 (the end of the prior quarter), the company’s balance sheet showed the following account balances: Cash $9,000 Accounts receivable        48,000 Inventory        12,600 Buildings and equipment (net)      214,100 Accounts payable          18,300 Common Stock        190,000 Retained earnings          75,400 Totals $283,700...
Hancock Company, a merchandising company, prepares its master budget on a quarterly basis. The following data...
Hancock Company, a merchandising company, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of the master budget for the second quarter. a. As of December 31 (the end of the prior quarter), the company’s balance sheet showed the following account balances:   Cash $ 13,100   Accounts receivable 55,800   Inventory 18,620   Buildings and equipment (net) 135,000   Accounts payable $ 47,000   Common stock 115,000   Retained earnings 60,520 $ 222,520 $ 222,520 b. Actual...
Hancock Company, a merchandising company, prepares its master budget on a quarterly basis. The following data...
Hancock Company, a merchandising company, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparation of the master budget for the second quarter a. As of December 31 (the end of the prior quarter), the company’s balance sheet showed the following account balances:   Cash $ 13,100   Accounts receivable 55,800   Inventory 18,620   Buildings and equipment (net) 135,000   Accounts payable $ 47,000   Common stock 115,000   Retained earnings 60,520 $ 222,520 $ 222,520 b. Actual...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT