The budget committee of Mustang Company collects the following data for its Accessories Store in preparing budgeted income statements for May and June 2020. 1. Sales for May are expected to be $900,000. Sales in June and July are expected to be 7% higher than the preceding month. 2. Cost of goods sold is expected to be 75% of sales. 3. Company policy is to maintain ending merchandise inventory at 15% of the following month's cost of goods sold. 4. Operating expenses are estimated to be: Sales salaries $30,000 per month Advertising 6% of monthly sales Delivery expense 2% of monthly sales Sales commissions 5% of monthly sales Rent expense $5,000 per month Depreciation $800 per month Utilities $600 per month Insurance $500 per month 5. Interest expense is $2,000 per month. Income taxes are estimated to be 30% of income before income taxes. Instructions (a) Prepare the merchandise purchases budget for each month in columnar form. (6) Prep are budgeted income statements for each month in columnar form. Show in the statements the details of cost of goods sold. MUSTANG COMPANY Accessories Store Merchandise Purchases Budget For the Months of May and June, 2020 May June Budgeted Sales IN Budgeted cost of goods sold Add: Desired ending merchandise inventory Total Less: Beginning merchandise inventory Required merchandise purchases Accessories Store Budgeted Income Statement For the Months of May and June, 2020 May June he Sales Revenue Cost of goods sold Beginning inventory Add: Purchases Cost of goods available for sale Less: Ending inventory Cost of goods sold Gross profit Operating expenses Sales salaries Advertising* Delivery** Sales commissions*** Rent Depreciation Utilities Insurance Total Income from operations Interest expense Income before income taxes Income tax expense (30%) Net income