Prepare budgeted income statement (Learning Objective 2) Wheels is an exotic car dealership. Suppose its Miami office

Question:

Prepare budgeted income statement (Learning Objective 2)

Wheels is an exotic car dealership. Suppose its Miami office projects that 2009 quarterly sales will increase by $3 \%$ in Quarter 1, by another $4 \%$ in Quarter 2, by another $6 \%$ in Quarter 3, and by another $5 \%$ in Quarter 4. Management expects operating expenses to be $80 \%$ of revenues during each of the first two quarters, $79 \%$ of revenues during the third quarter, and $81 \%$ during the fourth quarter. The office manager expects to borrow $\$ 100,000$ on July 1, with quarterly principal payments of $\$ 10,000$ beginning on September 30 and interest paid at an annual rate of $13 \%$. Assume that fourth-quarter 2008 sales were $\$ 4,000,000$.

Prepare a budgeted income statement for each of the four quarters of 2009 and for the entire year. Present the 2009 budget as follows:

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