Prepare budgeted income statement (Learning Objective 2)

Representatives of the various departments of Go Sports have assembled the following data. As the business manager, you must prepare the budgeted income statements for August and September 2009.

a. Sales in July were \(\$ 196,000\). You forecast that monthly sales will increase \(3 \%\) in August and 2\% in September.

b. Go Sports tries to maintain inventory of \(\$ 50,000\) plus \(20 \%\) of sales budgeted for the following month. Monthly purchases average \(60 \%\) of sales revenue in that same month. Actual inventory on July 31 is \(\$ 90,000\). Sales budgeted for October are \(\$ 220,000\).

c. Monthly salaries amount to \(\$ 15,000\). Sales commissions equal \(6 \%\) of sales for that month. Combine salaries and commissions into a single figure.

d. Other monthly expenses are:

Prepare Go Sports' budgeted income statements for August and September. Show cost of goods sold computations. Round all amounts to the nearest \(\$ 1,000\). For example, budgeted August sales are \(\$ 202,000(\$ 196,000 \times 1.03\) ) and September sales are \(\$ 206,000(\$ 202,000 \times 1.02)\).

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Rent expense. Depreciation expense. Insurance expense Income tax..... $3,000, paid as incurred $600 $200, expiration of prepaid amount 20% of operating income