Margison Shoe Stores Ltd.'s income statement and balance sheet reported the following data. The owners are budgeting for 2014, and expect sales and cost of goods sold to increase by 10%. To meet customer demand, ending inventory will need to be $80,000 at December 31, 2014. The owners can lower operating expenses by $6,000 by doing some of the work themselves. They hope to earn a net income of $160,000 next year.

Requirements
1. One of the most important decisions a business owner makes is the amount of inventory to purchase. Compute the amount of inventory to purchase in 2014.
2. Prepare the store's budgeted income statement for 2014 to reach the target net income of $160,000.

Margison Shoe Stores Ltd Income Statement For the Year Ended December 31, 2013 Sales. Cost of goods sold Gross profit.. Operating expenses $960,000 720,000 240,000 110,000 $130,000 ... Margison Shoe Stores Ltd. Balance Sheet As at December 31, 2013 Assets Liabilities and Equity 2000 190,000 . 220,000 160,000 Cash. 40,000 Accounts payable 70,000 Note payabl.... Land and Total liabilities. buildings, net. ....270,000