Prepare budgeted multiple-step income statements

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Reference no: EM13971541

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

Reference no: EM13971541

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