Prepare the Budgeted Income Statement that takes into account the loan. Assume that the Budgeted Income Statement

Fantastic news! We've Found the answer you've been seeking!

Question:

Prepare the Budgeted Income Statement that takes into account the loan.

Assume that the Budgeted Income Statement of your business is as follows:

Option I - Without a loan
Budgeted Income Statement
For the Budget Year Ended December 31
Budgeted sales volume 210,000
Costs
Costs of goods sold 98,692
Marketing and administrative costs 90,910
Total budgeted costs 189,602
Budgeted operating profit 20,398
Interest expense 0
Federal and other income taxes (25%) 5,099.5
Budgeted profit after taxes 15,298.5

Currently, the Cost of Goods Sold includes $12,000 of yearly rental payments. Taking a loan will influence the Budgeted Income Statement:
- the Cost of Goods Sold will reduce by the amount of rental payments;
- the Cost of Goods Sold will increase by $4,000 that include depreciation, property taxes, utilities.
- the Cost of Goods Sold will increase by the amount of Principal Payments;
- the Interest Expense will reduce the Budgeted Operating profit.

2) Search on the Internet and find two different loans that could suit your needs (e.g., with a higher interest rate or shorter term). Prepare the Loan Amortization Schedule and Budgeted Income Statement for each of them (use the templates that you prepared to solve the problems above). Compare the four options and choose the one that results in the highest amount of Budgeted Profit After Taxes.