Jacob Long, the controller of Arvada Corporation, is trying to prepare a sales budget for the coming
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Question:
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:
First Quarter Second Quarter Third Quarter Fourth Quarter Total
Sales revenue $ $ $ $ $
Cost of goods sold
Gross profit
Selling & administrative expenses
Net income $ $ $ $ $
Historically, cost of goods sold is about percent of sales revenue. Selling and administrative expenses are about percent of sales revenue.
Fred Arvada, the chief executive officer, told Mr Long that he expected sales next year to be percent for each respective quarter above last years level. However, Rita Banks, the vice president of sales, told Mr Long that she believed sales growth would be only percent.
Required
Prepare a pro forma income statement including quarterly budgets for the coming year using Mr Arvadas estimate.
Prepare a pro forma income statement including quarterly budgets for the coming year using Ms Banks estimate.
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