Exercise 7-15A (Algo) Preparing pro forma income statements with different assumptions LO 7-6 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: Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income First Quarter $186,000 111,600 74,400 18,600 $ 55,800 Second Quarter $216,000 129,600 86,400 21,600 $ 64,800 Third Quarter $226,000 135,600 90,400 22,600 $ 67,800 Fourth Quarter $276,000 165,600 110,400 27,600 $ 82,800 Total $904,000 542,400 361,600 90,400 $271,200 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 10 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