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 Second Quarter Third Quarter Fourth Quarter Total $ 171,000 $ 201,000 $ 211,000 $ 261,000 $ 844,000 85,500 422,000 100,500 100,500 20,100 105,500 105,500 21,100 85,500 17,100 $ 68,400 $ 80,400 $ 84,400 130,500 130,500 26,100 $ 104,400 422,000 84,400 $ 337,600 Historically, cost of goods sold is about 50 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 15 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 10 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. Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income $ First Quarter Second Quarter 0 0 0 $ 0 $ < Required A Third Quarter Fourth Quarter Total $ 0 0 0 0 0 0 0 $ 0 $ 0 Required B >