Question 5

RidgeandRobertsarepartnersinasmallaccountingfirm.Incomeandexpenses fortheyearended30June2020were:

FeesIncome	$224,000	MarketingExpenses	$6,900
OtherIncome	52,000	OtherExpenses	2,000
OfficeWages	31,000	Insurance	8,800
OfficeExpenses	9,600	Rent	11,200

Based on the data for the past three years, it shows that:

• Feesincomehas risenby9% per annum.
• Otherincomehas risenby3% per annum
• Officeexpenses,Officewages,andOtherExpenseshave risenby2% per annum.
• Insurancehas risen by6% per annum.
• Rent has risen by3% per annum.
• Marketingexpenseshave risenby7% per annum.

The purchase department advises that the firm is planning to upgrade the office fixtures and fittings, which will cost approximately $40,000.

Managers in Ridge and Roberts will receive a performance bonus at the end of the year if the firm achieves their budgeted profit.

Required:

(a) Prepare the Income Statement for year ended 30 June 2020 and prepare a budgeted Income Statement for the year ending 30 June 2021 based on the above information

For the budgeted income statement, you will need to establish the assumptions such as increase or decrease % and parameters which will be relevant for the budget. You can use the parameters provided in the income statement for 2020 and add any additional parameters if necessary.