Question

Pendleton Company, a merchandising company, is developing its master budget for 2015. The income statement for 2014 is as follows:

Pendleton Company Income Statement For Year Ending December 31, 2014
Gross sales	$1,500,000
Less: Estimated uncollectible accounts	(30,000)
Net sales	1,470,000
Cost of goods sold	(825,000)
Gross profit	645,000
Operating expenses (including $25,000 depreciation)	(375,000)
Net income	$270,000

The following are management’s goals and forecasts for 2015:

1.	Selling prices will increase by 6 percent, and sales volume will increase by 4 percent.
2.	The cost of merchandise will increase by 3 percent.
3.	All operating expenses are fixed and are paid in the month incurred. Price increases for operating expenses will be 10 percent. The company uses straight-line depreciation.
4.	The estimated uncollectibles are 2 percent of budgeted sales.

Required
Prepare a budgeted functional income statement for 2015.

Do not use negative signs with any of your answers.

Pendleton Company Budgeted Income Statement For the Year Ending December 31, 2015
Sales	$Answer
Less: Estimated uncollectible accounts	Answer
Net sales	Answer
Cost of goods sold	Answer
Gross profit	Answer
Operating expenses	Answer
Net income

Answer 1

Pendleton Company
Budgeted Income Statement
For the year Ended December 31, 2015
Sales	($1,500,000X1.06X1.04)			$        1,653,600
Less: Estimated uncollectible accounts	($1,653,600X2%)			$              33,072
Net Sales				$        1,620,528
Cost of Goods Sold	($825,000X1.04X1.03)			$            883,740
Gross Profit				$            736,788
Operating Expenses	(($350,000X1.10)+$25,000)			$            410,000
Net Income				$            326,788