Exercise 7-15A (Algo) Preparing pro forma income statements with different assumptions LO 7-6 Jacob Long, the controller of Arvada Corporation, is trying to prepare a sales budget for the coming year. The income statements for the last four quarters follow: Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income First Quarter $177,000 106,200 70,800 17,700 $ 53,100 Second Quarter $207,000 124, 200 82,800 20,700 $ 62,100 Third Quarter $217,000 130,200 86,800 21,700 $ 65,100 Fourth Quarter $ 267,000 160,200 106,800 26,700 $ 80,100 Total $868,000 520,800 347,200 86,800 $ 260,400 Historically, cost of goods sold is about 60 percent of sales revenue. Selling and administrative expenses are about 10 percent of sales revenue. Fred Arvada, the chief executive officer, told Mr. Long that he expected sales next year to be 10 percent for each respective quarter above last year's level. However, Rita Banks, the vice president of sales, told Mr. Long that she believed sales growth would be only 5 percent. Required a. Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Arvada's estimate. b. Prepare a pro forma income statement including quarterly budgets for the coming year using Ms. Banks' estimate. Complete this question by entering your answers in the tabs below. Required A Required B Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Arvada's estimate. First Quarter Second Quarter Third Quarter Fourth Quarter Total Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income Required A Required B > Complete this question by entering your answers in the tabs below. Required A Required B Prepare a pro forma income statement including quarterly budgets for the coming year using Ms. Banks' estimate. First Quarter Second Quarter Third Quarter Fourth Quarter Total Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income