H3

Budgeting Exercise 1: Prepare budgeted income statement

Representatives of the various departments of Go Sports have assembled the

following data. As the business manager, you must prepare the budgeted

income statements for August and September 2009.

a. Sales in July were $196,000. You forecast that monthly sales will increase

3% in August and 2% in September.

b. Go Sports tries to maintain inventory of $50,000 plus 20% of sales

budgeted for the following month. Monthly purchases average 60% of sales

revenue in that same month. Actual inventory on July 31 is $90,000. Sales

budgeted for October are $220,000.

c. Monthly salaries amount to $15,000. Sales commissions equal 6% of sales

for that month. Combine salaries and commissions into a single figure.

d. Other monthly expenses are:

Rent expense ...................................... $13,000 paid as incurred Depreciation expense ............................. $4,000 Insurance expense ................................. $1,000, expiration of prepaid amount Income tax ......................................... 30% of operating income