Thornton Corporation has three divisions, each operating as a responsibility center. To provide an incentive for...

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Thornton Corporation has three divisions, each operating as a responsibility center. To provide an incentive for divisional executive officers, the company gives divisional management a bonus equal to 15 percent of the excess of actual net income over budgeted net income. The following is Atlantic Division's current year's performance: Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income Current Year $ 4,150,000 2,330,000 1,820,000 770,000 $ 1,050,000 The president has just received next year's budget proposal from the vice president in charge of Atlantic Division. The proposal budgets a 4 percent increase in sales revenue with an extensive explanation about stiff market competition. The president is puzzled. Atlantic has enjoyed revenue growth of around 9 percent for each of the past five years. The president had consistently approved the division's budget proposals based on 4 percent growth in the past. This time, the president wants to show that he is not a fool. "I will impose a 14 percent revenue increase to teach them a lesson!" the president says to himself smugly. Assume that cost of goods sold and selling and administrative expenses remain stable in proportion to sales. Required a. Prepare the budgeted income statement based on Atlantic Division's proposal of a 4 percent increase. b-1. Prepare an income statement with 9 percent growth. b-2. If growth is actually 9 percent as usual, how much bonus would Atlantic Division's executive officers receive if the president had approved the division's proposal? c. Prepare the budgeted income statement based on the 14 percent increase the president imposed. d. If the actual results turn out to be a 9 percent increase as usual, how much bonus would Atlantic Division's executive officers receive since the president imposed a 14 percent increase? Complete this question by entering your answers in the tabs below. Req A Req B1 Req B2 Req C Req D Prepare the budgeted income statement based on Atlantic Division's proposal of a 4 percent increase. Sales revenue THORNTON CORPORATION Budgeted Income Statement Cost of goods sold Gross profit Selling & administrative expenses Net income Rea A Rea B1 > Thornton Corporation has three divisions, each operating as a responsibility center. To provide an incentive for divisional executive officers, the company gives divisional management a bonus equal to 15 percent of the excess of actual net income over budgeted net income. The following is Atlantic Division's current year's performance: Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income Current Year $ 4,150,000 2,330,000 1,820,000 770,000 $ 1,050,000 The president has just received next year's budget proposal from the vice president in charge of Atlantic Division. The proposal budgets a 4 percent increase in sales revenue with an extensive explanation about stiff market competition. The president is puzzled. Atlantic has enjoyed revenue growth of around 9 percent for each of the past five years. The president had consistently approved the division's budget proposals based on 4 percent growth in the past. This time, the president wants to show that he is not a fool. "I will impose a 14 percent revenue increase to teach them a lesson!" the president says to himself smugly. Assume that cost of goods sold and selling and administrative expenses remain stable in proportion to sales. Required a. Prepare the budgeted income statement based on Atlantic Division's proposal of a 4 percent increase. b-1. Prepare an income statement with 9 percent growth. b-2. If growth is actually 9 percent as usual, how much bonus would Atlantic Division's executive officers receive if the president had approved the division's proposal? c. Prepare the budgeted income statement based on the 14 percent increase the president imposed. d. If the actual results turn out to be a 9 percent increase as usual, how much bonus would Atlantic Division's executive officers receive since the president imposed a 14 percent increase? Complete this question by entering your answers in the tabs below. Req A Req B1 Req B2 Req C Req D Prepare the budgeted income statement based on Atlantic Division's proposal of a 4 percent increase. Sales revenue THORNTON CORPORATION Budgeted Income Statement Cost of goods sold Gross profit Selling & administrative expenses Net income Rea A Rea B1 >