In May 2017, the budget committee of Grand Stores assembles the following data in preparation of...

Question:

In May 2017, the budget committee of Grand Stores assembles the following data in preparation of budgeted merchandise purchases for the month of June.

1. Expected sales: June $507,300, July $608,800.

2. Cost of goods sold is expected to be 75% of sales.

3. Desired ending merchandise inventory is 30% of the following (next) month's cost of goods sold.

4. The beginning inventory at June 1 will be the desired amount.

a. Compute the budgeted merchandise purchases for June.

b. Prepare the budgeted multiple-step income statement for June through gross profit.

In: come Statement:

Income statement, otherwise known as the statement of financial performance, shows the results of the company's operation during the period offered. It shows the revenues generated, costs and expenses incurred and the net income or loss during the period.

Answer and Explanation:

a. Compute the budgeted merchandise purchases for June.

Expected Sales 507,300
Cost of Goods Sold Ratio 75%
Cost of Goods Sold 380,475
Desired Ending Inventory (608,800*75%*30%) 136,980
Beginning Inventory (507,300*75%*30%) -114,142.50
Purchases-June 403,312.50


b. Prepare the budgeted multiple-step income statement for June through gross profit.

Expected Sales 507,300
Cost of Goods Sold -380,475
Gross Profit 126,825

Learn more about this topic:

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Operations of an Income Statement

from Accounting 101: Financial Accounting

Chapter 8 / Lesson 5
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