Question

The Northeast Regional Division of Union Corp. has been requested to prepare a quarterly budgeted income statement for 2020. The regional manager expects that sales in the first quarter of 2020 will increase by 10% over the same quarter of the preceding year and will then increase by 5% for cach succeeding quarter in 2020, The corporate head office has requested that the regional manager maintain an inventory in dollars equal to 25% of the next quarter's sales. Quarterly purchases average 55% of quarterly sales, Budgeted ending inventory on December 31, 2019 is $176,000. Quarterly salaries are 20,000 plus 5% of sales. All salaries are classified as sales salaries. Other quarterly expenses are estimated to be as follows: Rent expense $24,000 Depreciation on office equipment $12,000 Utilities expense $3,600 Miscellaneous expenses 2% of sales S720,000 396,000 324,000 The income statement for the first quarter of 2019 was as follows: Income Statement For the Quarter Ended March 31, 2019 Sales.... .... Cost of goods sold ................. Gross profit....... Operating expenses Sales salaries.... Rent expense Depreciation ..... Utilities Miscellaneous..... Total operating expenses....... Net income... $52,000 24,000 12.000 1.600 2.800 104.400 $219.600 Instructions Prepare a budgeted quarterly income statement in tabular form for the first quarter of 2020. (Show computatione

Answer 1

Answer:

The following is UNION CORP Northeast Regional Division First Quarter Budgeted income statement in 2020.(Ended in march 31 2020).

BUDGETED INCOME STATEMENT (MARCH 31 2020)

Particulars	Calculation	Amount	Amount
Sales	=7,20,000*110/100 (sales in first quarter of 2020 will increase 10%)=7,92,000		$7,92,000
Cost of goods sold	=Opening stock +purchase-closing stock(working notes) =1,76,000+4,35,600-2,07,900=4,03,700		$4,03,700
Gross profit	=Sales -Cost of goods sold =7,92,000-4,03,700=3,88,300		$3,88,300
OPERATING EXPENSES
Sales salaries	=20,000+(7,92,000*5/100) =20,000+39,600 =59,600	$59,600
Rent Expense		$24,000
Depreciation		$12,000
Utilities		$3,600
Miscellaneous expenses	=7,92,000*2/100 =15,840	$15,840
TOTAL OP EXPENSES	=59,600+24,000+12,000+3,600+15,840=1,15,040		$1,15,040
NET INCOME	=Gross profit -Total op expenses =3,88,300-1,15,040 =2,73,260		$2,73,260

Working notes:

Opening stock (given)=$1,76,000

Purchase(Quarterly purchases average 55% of quarterly sales)=7,92,000*55/100

=$4,35,600

Closing stock =(7,92,000*105/100) *25%

=8,31,600*25/100

=$2,07,900   

Answer 2

How is 176,000 + 435, 600 - 207,900 = 388,300? please explain. Thank you.