The Lion Basketball team has been requested to prepare a quarterly budgeted income statement for 2016.

The team manager expects that sales in the first quarter of 2016 will increase in volume by 10% over the same quarter of the preceding year and will then increase by 5% for each succeeding quarter in 2016.

The corporate head office has requested that the team manager maintain an inventory in dollars equal to 15% of the next quarter's sales.

Quarterly purchases average 40% of quarterly sales.

Budgeted ending inventory on December 31, 2015 is $10,000.

Quarterly salaries are $10,400 plus 8% of sales. All salaries are classified as sales salaries.

Other quarterly operating expenses are estimated to be as follows:

Rent expense $5,200

Depreciation on office equipment $1,800

Utilities expense $2,100

Miscellaneous expenses 3% of sales

The income statement information for the first quarter of 2015 was as follows:

Sales ................................................................................................ $160,000

Cost of goods sold .......................................................................... 71,000

Instructions

Prepare a budgeted quarterly income statement for the first quarter of 2016. (Show computations.)

Solution Ex. 189

L Basketball Team
Budgeted Income Statement
For the Quarter Ending March 31, 2016