Budgeted Income Statement

Coral Seas Jewelry Company makes and sells costume jewelry. For the coming year, Coral Seas expects sales

of $$15\mathrm{.}9$ million and cost of goods sold of $$8\mathrm{.}75$ million. Advertising is a key part of Coral Seas' business

strategy, and total marketing expense for the year is budgeted at $$2\mathrm{.}8$ million. Total administrative expenses

are expected to be $$675,000.$ Coral Seas has no interest expense. Income taxes are paid at the rate of $40$

percent of operating income.

Required:

Construct a budgeted income statement for Coral Seas Jewelry Company for the coming year. Enter your

answers in dollars and not in millions.

Coral Seas Jewelry Company

Budgeted Income Statement

For the Coming Year

What if Coral Seas had interest payments of $$500,000$ during the year? What effect would that have on

operating income? On income before taxes? On net income? If no effect, select $"$no impact" and enter

$"0".$

Operating income

Income before taxes

$$

Decrease

$$

to $

$($im