1. Sales for May are expected to be $1,040,000. Sales in June and July are expected to be 5% higher than the preceding month. 2. Cost of goods sold is expected to be 75% of sales. 3. Company policy is to maintain ending merchandise inventory at 10% of the following month's cost of goods sold. 4. Operating expenses are estimated to be as follows: Sales salaries $30,800 per month Advertising 6 % of monthly sales Delivery expense 2 % of monthly sales Sales commissions 5 % of monthly sales Rent expense $5,670 per month Depreciation $870 per month Utilities $630 per month Insurance $540 per month 5. Interest expense is $2,000 per month. Income taxes are estimated to be 20% of income before income taxes. Your answer is partially correct. Prepare the merchandise purchases budget for each month in columnar form. LILY COMPANY San Miguel Store Merchandise Purchases Budget For the Months of May and June, 2022 May June Budgeted Cost of Goods Sold $ 780000 $ 819000 Add : Desired Ending Merchandise Inventory Total LILY COMPANY San Miguel Store Merchandise Purchases Budget For the Months of May and June, 2022 A May June Budgeted Cost of Goods Sold ta 780000 819000 Add A Desired Ending Merchandise Inventory Total Less A Beginning Merchandise Inventory 78000 81900 Required Merchandise Purchases $ ta 78000 ta 81900 LILY COMPANY San Miguel Store Budgeted Income Statement For the Months of May and June, 2022 May June Sales $ 1040000 $ 1092000 Cost of Goods Sold Beginning Inventory 78000 i 81900 Purchases 78000 81900 Cost of Goods Available for Sale 78000 81900 Less : Ending Inventory 39000 40950 Cost of Goods Sold 780000 i 819000 Gross Profit 260000 273000 Gross Profit 260000 273000 Operating Expenses Sales Salaries 30800 i 655200 Advertising 62400 i 65520 Delivery 20800 i 21840 Sales Commissions 4 52000 i 54600 Rent 5670 i 5670 i Depreciation 870 i 870 i Utilities 630 i 630 i Insurance 540 i 540 i Total Operating Expenses 173710 i 215190 Depreciation 870 870 Utilities 630 i 630 i Insurance 540 540 i 1 Total Operating Expenses 173710 i 215190 Income from Operations 86290 57810 Interest Expense 2000 i 2000 i Income Before Income Taxes 84290 55810 Income Tax Expense 16858 11162 Net Income /(Loss) $ 67432 $ 44647