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Jacob Long, the controller of Arvada Corporation, is trying to prepare a sales budget for...

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Accounting

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 Second Quarter $220,000 110,000 110,000 22,000 $ 88,000 Third Fourth Quarter $190,000 95,000 95,000 19,000 S 76,000 Quarter Quarter $280,000 140,000 140,000 28,000 Total $920,000 460,000 460,000 92,000 Sales revenue Cost of goods sold Gross profit Selling administrative expenses $230,000 115,000 115,000 23,000 $ 92,000 Net income $112,000 $368,000 Historically, cost of goods sold is about 50 percent of sales revenue. Selling and administrative expenses are about 10 percent of sales revenue. Fred Arvada, the chief executive officer, told Mr. Long that he expected sales next year to be 15 percent for each respective quarter above last year's level. However, Rita Banks, the vice president of sales, told Mr. Long that she believed sales growth would be only 10 percent. Required a. Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Arvada's estimate. b. Prepare a pro forma income statement including quarterly budgets for the coming year using Ms. Banks's estimate.

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