1. Budgeted Income Statement

   Coral Seas Jewelry Company makes and sells costume jewelry. For the coming year, Coral Seas expects sales of $19,100,000 and cost of goods sold of $10,505,000. Advertising is a key part of Coral Seas' business strategy, and total marketing expense for the year is budgeted at $3,438,000. Total administrative expenses are expected to be $764,000. Coral Seas has no interest expense. Income taxes are paid at the rate of 40 percent of operating income.

   Required:

   Question Content Area

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

   Coral Seas Jewelry Company Budgeted Income Statement For the Coming Year

   Administrative expenseIncome taxesMarketing expensePurchaseSales		$- Select -
   Less: Administrative expenseLess: Beginning finished goodsLess: Cost of goods soldLess: Ending finished goodsLess: Income taxes		- Select -
   Gross margin		$fill in the blank a40c21ffb015fc3_5
   Less:
   Cost of goods soldIncome taxesMarketing expenseSalaries expenseSales	$- Select -
   Administrative expenseCost of goods soldIncome taxesSalaries expenseSales	- Select -	- Select -
   Operating income		$fill in the blank a40c21ffb015fc3_11
   Less: Administrative expenseLess: Cost of goods soldLess: Income taxesLess: Marketing expense		- Select -
   Net incomeNet loss		$- Select -

   Question Content Area

   2. What if Coral Seas had interest payments of $573,000 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	DecreaseIncreaseNo Impact	to	$fill in the blank 89a01f09cff1035_2
   Income before taxes	DecreaseIncreaseNo Impact	to	$fill in the blank 89a01f09cff1035_4
   Net income	DecreaseIncreaseNo Impact	to	$fill in the blank 89a01f09cff1035_6

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