Preparing pro forma income statements with different assumptions Norman Jelen, the controller of Wing Corporation, is trying to prepare a sales budget for the coming year. The income statements for the last four quarters follow.

Historically, cost of goods sold is about 60 percent of sales revenue. Selling and administrative expenses are about 10 percent of sales revenue. Sam Wing, the chief executive officer, told Mr. Jelen that he expected sales next year to be 10 percent for each respective quarter above last year's level. However, Glenda Sullivan, the vice president of sales, told Mr. Jelen 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. Wing's estimate.
b. Prepare a pro forma income statement including quarterly budgets for the coming year using Ms. Sullivan's estimate.
c. Explain why two executive officers in the same company could have different estimates of future growth.

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First Quarter Second Quarter Third Quarter Fourth Quarter Total Sales revenue Cost of goods sold Gross profit Selling & admin. expenses Net income $210,000 $260,000 156,000 104,000 $200,000 $170,000 102,000 68,000 $840,000 126,000 80,000 336,000 21,000 S 63,000 20,000 26,000 $ 78,000 84,000 S 51,000 $ 60,000 $252,000