The budget committee of Suppar Company collects the following data for its San M

Question

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. 2. 3. 4. Sales for May are expected to be $800,000. Sales in June and July are expected to be 5% higher than the preceding month Cost of goods sold is expected to be 75% of sales Company policy is to maintain ending merchandise inventory at 10% of the following month's cost of goods sold Operating expenses are estimated to be as follows: Sales salaries Advertising Delivery expense Sales commissions Rent expense Depreciation Utilities Insurance $35,000 6 % 2 % 5 % per month of monthly sales of monthly sales of monthly sales $5,000 per month $800 per month $600per month $500 per month 5. Interest expense is $2,000 per month. Income taxes are estimated to be 30% of income before income taxes

Explanation / Answer

MULTI STEP INCOME STATEMENT FOR THE MONTH OF MAY AND JUNE May   June Sales Revenue $           8,00,000 $       8,40,000 Less: Cost of Goods Sold 75% of Sales $           6,00,000 $       6,30,000 Gross Profit $           2,00,000 $       2,10,000 Less: Operating Expenses Sales Salaries $              35,000 $           35,000 Advertising (6% of sales) $              48,000 $           50,400 Delievery Expenses(2% of sales) $              16,000 $           16,800 Sales Commission(5% of sales) $              40,000 $           42,000 Rent Expenses $                 5,000 $             5,000 Depreciation $                    800 $                 800 Utilities $                    600 $                 600 Inusrance $                    500 $                 500 Total Operating Expenses $           1,45,900 $       1,51,100 Operating Income $              54,100 $           58,900 Other income and expenses interest Expenses $                 2,000 $             2,000 Net Income before tax $              52,100 $           56,900 Less: taxation @ 30% $              15,630 $           17,070 Net income after tax $              36,470 $           39,830

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