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Question E22-32: Budgeted Income Statement Quality Wool Company, a merchandising company, is developing its master budget for next year. The income statement for the current
Question E22-32: Budgeted Income Statement
Quality Wool Company, a merchandising company, is developing its master budget for next year. The income statement for the current year is as follows:
QUALITY WOOL COMPANY Income Statement For Year Ending December 31 | |
Gross Sales | $1,200,000 |
Less Uncollectible Accounts | $(26,000) |
Collected Sales | $1,174,000 |
Cost of Goods Sold | $(780,000) |
Profit before Operating Expenses | $394,000 |
Operating Expenses (including $15,000 depreciation) | $(206,000) |
Income before Tax | $188,000 |
The following are managements goals and forecasts for next year:
- Selling prices will increase by 3%, and sales volume will increase by 5%.
- The cost of merchandise will increase by 2%.
- All operating expenses are fixed. Price increases for operating expenses will be 4%. The company uses straight-line depreciation.
- The estimated uncollectibles are 2% of budgeted sales.
Prepare a budgeted functional income statement for next year.
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