Chester’s Convenience Stores’ income statement for the year ende

Chester€™s Convenience Stores€™ income statement for the year ended December 31, 2011 and its balance sheet as of December 31, 2011 reported the following.

Chester€™s Convenience Stores€™ income statement for the year ende

The business is organized as a proprietorship, so it pays no corporate income tax. The owner is budgeting for 2012. He expects sales and cost of goods sold to increase by 5%. To meet customer demand, ending inventory will need to be $83,000 at December 31, 2012. Th e owner hopes to earn a net income of $158,000 next year.
Requirements
1. One of the most important decisions a manager makes is the amount of inventory to purchase. Show how to determine the amount of inventory to purchase in 2012.
2. Prepare the store€™s budgeted income statement for 2012 to reach the target net income of $158,000. To reach this goal, operating expenses must decrease by$11,850.

Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula                Ending Inventory Formula =...

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