Greenway Company's balance sheet as of December 31, Year 1 is provided below:Greenway CompanyBalance SheetDecember 31, Year 1Assets? Cash$ 35,000 Accounts receivable 40,000 Inventory 25,000 Plant and equipment, net of depreciation 300,000Total assets$ 400,000??Liabilities and stockholders' equity? Accounts payable$ 30,000 Notes payable 50,000 Capital stock, no par 200,000 Retained earnings 120,000Total liabilities and stockholders' equity$ 400,000In anticipation of preparing the company's operating budget for the upcoming period, the company's accountant has gathered the following information:(a) December Year 1 sales were $220,000. Sales are expected to grow at a rate of 8% per month. Half of all sales
are for cash and half are on account.(b) Inventory purchases are expected to total $100,000 during January and the inventory account is expected to have a $28,000 balance at January 31, Year 2. All inventory purchases are on account.(c) Selling and administrative expenses for January Year 2 are budgeted at $60,000 (exclusive of depreciation) plus 10% of sales. Selling and administrative expenses are paid in cash. Depreciation is budgeted at $3,000 for the month.(d) The notes payable will be paid in January, Year 2. The amount due will be $50,500. The $500 represents interest expense for the month of January, Year 2.(e) The company expects to purchase a new machine during January Year 2 at a cost of $5,000. Required:Prepare a budgeted income statement for the month of January Year 2. Use the traditional income statement format and ignore income taxes.
What will be an ideal response?
Answers will vary
| Greenway Company | ||
| Pro Forma Income Statement | ||
| For the Month Ended January 31, Year 2 | ||
| Sales | ? | $ 237,600 |
| Less cost of goods sold | ? | ? |
| Beginning inventory | $ 25,000 | ? |
| Purchases | $ 100,000 | ? |
| Cost of goods available for sale | 125,000 | ? |
| Less ending inventory | (28,000) | 97,000 |
| Gross margin | ? | $ 140,600 |
| Less operating expenses: | ? | ? |
| Selling and administrative expenses | 83,760 | ? |
| Depreciation expense | 3,000 | ? |
| Interest expense | 500 | 87,260 |
| Net income | ? | $ 53,340 |
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