P24-5C The budget committee of Ale Company collects the following data for its Weston Store in preparing budgeted income statements for July and August 2017 .

1. Expected sales : July $ 450,000 , August $ 500,000 , September $ 550,000 .

2. Cost of goods sold is expected to be 60 % of sales .

3. Company policy is to maintain ending merchandise inventory at 20 % of the following month's cost of goods sold .

4. Operating expenses are estimated to be : Sales salaries $50,000 per month

Advertising 4% of monthly sales

Delivery expense 2% of monthly sales

Sales commissions 3% of monthly sales

Rent expense $3,000 per month

Depreciation $700 per month

Utilities $500 per month

Insurance $300 per month

5. Income taxes are estimated to be 30 % of income from operations .

Instructions:

( a ) Prepare the merchandise purchases budget for each month in columnar form .

( b ) Prepare budgeted income statements for each month in columnar form . Show the details of cost of goods sold in the statements .