Patz Company has just received a franchise to distribute air conditioners. The company began business on January 1 with the following assets:
Cash ............................................................................... $ 60,000
Inventory ........................................................................ 90,000
Warehouse, office, and delivery facilities and equipment ................. 800,000
All facilities and equipment have a useful life of 20 years and no residual value. First quarter sales are expected to be $500,000 and should be doubled in the second quarter. Third quarter sales are expected to be $ 1,200,000. Two percent of sales are considered to be uncollectible. The gross profit margin should be 40%. Variable marketing expenses (excluding uncollectible accounts) are budgeted at 10% of sales, and fixed marketing expenses (excluding depreciation) are budgeted at $50,000 per quarter. Administrative expenses are fixed and should total $30,000 per quarter, excluding depreciation.
Required:
Prepare a budgeted income statement for the second quarter.