- Exercise 14 15a Static Preparing Pro Forma Income Statements With Different Assumptions Lo 14 6 Jacob Long The Contro 1 (80.7 KiB) Viewed 13 times
- Exercise 14 15a Static Preparing Pro Forma Income Statements With Different Assumptions Lo 14 6 Jacob Long The Contro 2 (35.38 KiB) Viewed 13 times
Exercise 14-15A (Static) Preparing pro forma Income statements with different assumptions LO 14-6 Jacob Long, the controller of Arvada Corporation, is trying to prepare a sales budget for the coming year. The income statements for the last four quarters follow: First Second Third Fourth Quarter Quarter Quarter Quarter Sales revenue Total $425,000 $90,000 $100,000 $105,000 $130,000 Cost of goods sold 54,000 60,000 63,000 78,000 255,000 Gross profit 36,000 8,500 42,000 52,000 170,000 40,000 10,000 18,500 13,000 42,000 Selling & administrative expenses Net income. $27,500 $ 30,000 $ 31,500 $ 39,000 $128,000 Historically, cost of goods sold is about 60 percent of sales revenue. Selling and administrative expenses are about 10 percent of sales revenue. Fred Arvada, the chief executive officer, told Mr. Long that he expected sales next year to be 8 percent for each respective quarter above last year's level. However, Rita Banks, the vice president of sales, told Mr. Long that she believed sales growth would be only 5 percent. Required a. Prepare a pro forma income
statement including quarterly budgets for the coming year using Mr. Arvada's estimate. b. Prepare a pro forma income
statement including quarterly budgets for the coming year using Ms. Banks' estimate. Complete this
question by entering your answers in the tabs below. Required A Required B Prepare a pro forma income
statement including quarterly budgets for the coming year using Mr. Arvada's estimate. First Quarter Second Quarter Third Quarter Fourth Quarter Total Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income Required B > < Required A
b. Prepare a pro forma income
statement including quarterly budgets for the coming year using Ms. Banks' estimate. Complete this
question by entering your answers in the tabs below. Required A Required B Prepare a pro forma income
statement including quarterly budgets for the coming year using Ms. Banks' estimate. First Quarter Second Quarter Third Quarter Fourth Quarter Total Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income < Required A Required 8 >