Question
Jacob Long, the controller of Arvada Corporation, is trying to prepare a sales budget for the coming year. The income statements for the last
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 $ 181,000 126,700 54,300 18,100 $ 211,000 $ 221,000 147,700 63,300 21,100 $ 36,200 $ 42,200 154,700 66,300 22,100 $ 44,200 $ 271,000 189,700 81,300 Total $ 884,000 618,800 27,100 $ 54,200 265,200 88,400 $ 176,800 Historically, cost of goods sold is about 70 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. 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 Third Quarter Fourth Quarter Total Required A Required B Prepare a pro forma income statement including quarterly budgets for the coming year using Ms. Banks' estimate. Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income First Quarter Second Quarter Third Quarter Fourth Quarter Total
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