Hansboro Corporation's budget planning meeting is like a zoo. Neil Gleason, the credit manager, is naturally conservative and Rachel Lawson, the marketing manager, is the opposite. They have argued back and forth about the effect of various factors that influence the sales growth rate, such as credit policies and market potential. Based on the following current year data provided by Shirley Chandler, the controller, Neil expects Hansboro's revenues to grow 5 percent each quarter above last year's level; Rachel insists the growth rate will be 8 percent per quarter.

Historically, cost of goods sold is projected at 50 percent of sales revenue. Selling and administrative expenses are expected to be 12.5 percent of sales revenue.
Required
a. Prepare a pro forma income statement for the coming year using the credit manager's growth estimate.
b. Prepare a pro forma income statement for the coming year using the marketing manager's growth estimate.
c. Explain why two executives in the same company could have different estimates of future growth.

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First Quarter Second Quarter Third Quarter Fourth Quarter Current Year Total Sales revenue Cost of goods sold Gross margin Selling & admin. expenses Net income $240,000 $200,000 $216,000 $314,000 $970,000 106,000 110,000 26,400 86,000 73,000 83,600 $117,400 $360,000 122,000 118,000 32,000 101,000 99,000 26,000 156,000 158,000 40,600 485,000 485,000 125,000