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:

	First Quarter	Second Quarter	Third Quarter	Fourth Quarter	Total
Sales revenue	$ 180,000	$ 210,000	$ 220,000	$ 270,000	$ 880,000
Cost of goods sold	108,000	126,000	132,000	162,000	528,000
Gross profit	72,000	84,000	88,000	108,000	352,000
Selling & administrative expenses	18,000	21,000	22,000	27,000	88,000
Net income	$ 54,000	$ 63,000	$ 66,000	$ 81,000	$ 264,000

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 15 percent for each respective quarter above last years level. However, Rita Banks, the vice president of sales, told Mr. Long that she believed sales growth would be only 10 percent.

Required

1. Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Arvadas estimate.
2. Prepare a pro forma income statement including quarterly budgets for the coming year using Ms. Banks estimate.

Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Arvadas estimate.

	First Quarter	Second Quarter	Third Quarter	Fourth Quarter	Total
Sales revenue
Cost of goods sold
Gross profit
Selling & administrative expenses
Net income