Question

Pendleton Company, a merchandising company, is developing its master budget for 2015. The income statement for 2014 is as follows:
Pendleton Company Income Statement For Year Ending December 31, 2014
Gross sales $3,000,000
Less:
Estimated uncollectible accounts (60,000)
Net sales 2,940,000
Cost of goods sold (1,650,000)
Gross profit 1,290,000
Operating expenses (including $25,000 depreciation) (750,000)
Net income $540,000
The following are management's goals and forecasts for 2015:
1.Selling prices will increase by 6 percent, and sales volume will increase by 4 percent.
2.The cost of merchandise will increase by 3 percent.
3.All operating expenses are fixed and are paid in the month incurred. Price increases for operating expenses will be 10 percent. The company uses straight-line depreciation.
4.The estimated uncollectibles are 2 percent of budgeted sales.
Prepare a budgeted functional income statement for 2015.

Answer 1

Answer:

$651,076

Explanation:

Preparation of a budgeted functional income statement for 2015.

PENDLETON COMPANY budgeted functional income statement for the year 2015.

Sales $3,307,200

($3,000,000*106%*104%)

Less: Estimated uncollectible accounts $66,144

($3,307,200*2%)

Net sales $3,241,056

($3,307,200-$66,144)

COGS $1,767,480

(1,650,000*104%*103%)

Gross Profit $1,473,576

($3,241,056-$1,767,480)

Operating expenses $822,500

[(725000*110%)+25000]

($750,000-$25,000=$725,000)

Net Income $651,076

($1,473,576-$822,500)

Therefore the budgeted functional income statement for 2015 is $651,076