Chuck€™s Convenience Stores€™ income statement for the year ended December 31, 2013, and its balance sheet as of December 31, 2013, reported the following. The business is organized as a proprietorship, so it pays no corporate income tax. The owner is budgeting for 2014. He expects sales and cost of goods sold to increase by 10%. To meet customer demand, ending inventory will need to be $84,000 at December 31, 2014. The owner hopes to earn a net income of $166,000 next year.

Requirements
1. One of the most important decisions a manager makes is the amount of inventory to purchase. Show how to determine the amount of inventory to purchase in 2014.
2. Prepare the store€™s budgeted income statement for 2014 to reach the target net income of $166,000. To reach this goal, operating expenses must decrease by$2,900.

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A1 A1 Chuck's Convenience Stores Balance Sheet December 31, 2013 Assets Chuck's Convenience Stores Income Statement Year Ended December 31, 2013 Sales Cost of sales Gross profit Operating expenses 975,000 2 uablities and Capital $ 28,000 Cash Inventories Land and 48,000 Accounts payable Note payable Total liabilities 251,000 216,000 Net income s 138.000 buildings, net 262,000 0wner, capital Total liabilities 3700 and capital Total assets