P6-76B. (Learning Objective 3: Determining the amount of inventory to purchase) Chris’

Convenience Store’s Income Statement and Balance Sheet reported the following. The business is organized as a proprietorship, so it pays no corporate income tax. The owner is budgeting for 20X6. He expects sales and cost of goods sold to increase by 10%. To meet customer demand, ending inventory will need to be €76,000 at December 31, 20X6. The owner hopes to earn a net income of €161,000 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 20X6.
2. Prepare the store’s budgeted Income Statement for 20X6 to reach the target net income of €161,000. To reach this goal, operating expenses must decrease by €4,800.

Transcribed Image Text:

A1 A1 Chris' Convenience Stores Income Statement 1 Year Ended December 31, 20X5 1 2 Sales 964,000 2 Assets Chris' Convenience Stores Balance Sheet December 31, 20X5 Liabilities 3 Cost of sales 722,000 3 Cash 35,000 Accounts payable 28,000 4 Gross profit 242,000 4 Inventories 5 Operating expenses 110,000 5 Land and buildings, net 6 Net income 132,000 6 65,000 Note payable 268,000 Total liabilities Owner, capital 193,000 221,000 147,000 7 7 Total assets 368,000 Total liabilities and capital 368,000 8