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Medford Stores, a retailer in a shopping mall, prepared the following income statement for its operations for the month just ended: MEDFORD STORES Income Statement
Medford Stores, a retailer in a shopping mall, prepared the following income statement for its operations for the month just ended:
MEDFORD STORES
Income Statement
For the Month Ended April
Sales $
Cost of goods sold
Gross profit
Operating expenses:
Sales commissions expense $
Advertising expense
Lease expense
Depreciation expense
Salaries expense
Other operating expenses
Income before income taxes
Income tax expense
Net income $
Sales commissions were of sales. Income taxes were of income before income taxes. Both should continue at the same rate for the remainder of the year.
Medford Stores is preparing the budget for the month of May. If no basic changes are made, Medfords management expects that the income statement would be virtually identical to the one for April. However, Medfords management has decided to make some changes in the operations. The plans include the following:
Increase advertising expense by
Decrease all selling prices by
Increase the number of units sold by as a result of the first two changes.
a Prepare a budgeted income statement for the month of May. Round all amounts on the
income statement to the nearest dollar.
MEDFORD STORES
Budgeted Income Statement
For the Month Ended May
Sales Answer
Cost of Goods Sold Answer
Gross Profit
Operating Expenses:
Sales Commission Expense Answer
Advertising Expense Answer
Lease Expense Answer
Depreciation Expense Answer
Salaries Expense Answer
Other Operating Expenses Answer
Income Loss before Income Taxes
Income Tax Expense Answer
Net Income Loss
b Complete the following statement:
Medfords management Answer
make the planned changes because the changes would result in a $Answer
Answer
in net income.
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