Question

Applewood Company is a service based company. They are putting together their budgeted income statement for next year. They project their next year's budget based on prior year's results. Their prior year's income statement follows:        

          Applewood Company Actual Income Statement For Prior Year

Sales          886,134

Expenses:

Sales commission expense 97,475

Rent expense 22,800

Advertising expense 89,312

Salaries expense 219,000

Payroll tax expense 24,210

Depreciation 22,000

Total Expenses 474,797

Income before taxes 411,337

Income tax expense 123,401

Net Income/(Loss) 287,936

Applewood's management also predicts the following information to assist in preparing the budget for the next year.

1. Sales will increase by 9%.
2. Sales Commissions are 11% of sales.
3. Rent expense for next year is $1,900 per month for January - August and will increase to $2,100 on September 1st.
4. Advertising expense is 12% of sales.
5. Salaries are expected to increase by 3%.
6. Payroll tax expense is expected to remain 7.65% of commissions and salaries combined.
7. Depreciation expense is expected to remain unchanged.
8. The income tax rate is 30%

Prepare a budgeted income statement for the next year. Round all calculations to the nearest whole dollar.

Answer 1

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[4.945,886 Aus . Apple wood company Budgeted Income Statement . for next year . Sales ($886. 134 x 109 %). Eponses, y Sales Commission Expense (965,886x\lve) # 106,247 Reut Expense (1500X8 4 2 100 X4) $23,600 Advertising expense (965,886X12..) 115,906 Sabies Expense (P19,000 x 103 v.) "$225,570 Bayeoll tax expense ($106,94784225570)24 $25,384 Depreciation $20,000 Total Expense Income before taxes Income tax expense @ 30% Net Income (ross) $518,707 $447,179 $134,154 $313,0275