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LESSON 14-2LESSON 14-2

Budgeted Income Statement

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SALES BUDGET SCHEDULESALES BUDGET SCHEDULE

A statement that shows the projected net sales for a budget period is called a sales budget schedulePrepared first because the other schedules

are affected by the projected net salesProjected net sales are used to estimate the

amount of merchandise to purchase & the amount that may be spent for salaries, advertising, & other selling & administrative expenses

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LESSON 14-2

1. Enter actual and projected units.

2. Determine sales percentages.

6. Calculate total net sales.

3. Calculate unit sales volume.

4. Enter unit sales prices.

5. Calculate projected net sales.

SALES BUDGET SCHEDULESALES BUDGET SCHEDULE page 419

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PURCHASES BUDGET SCHEDULEPURCHASES BUDGET SCHEDULE

A statement prepared to show the projected amount of purchases that will be required during a budget period is called a purchases budget scheduleFactors to consider when planning a

purchases budget schedule:Projected unit salesThe quantity of merchandise on hand at the

beginning of the budget period

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LESSON 14-2

1. Calculate ending inventory for each quarter.

2. Enter projected unit sales.

3. Determine total units needed.

4. Enter beginning inventory.

6. Enter unit cost.

5. Determine purchases.

7. Determine cost of purchases.

PURCHASES BUDGET SCHEDULEPURCHASES BUDGET SCHEDULE page 420

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SELLING EXPENSES BUDGET SCHEDULESELLING EXPENSES BUDGET SCHEDULE

A statement prepared to show projected expenditures related directly to the selling operations is called a selling expenses budget scheduleSales managers project the information for the

selling expenses budget schedule by collaborating with other sales personnelSome selling expense items are relatively stable &

require little budget planning (depreciation expense, insurance premiums)

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LESSON 14-2

SELLING EXPENSES SELLING EXPENSES BUDGET SCHEDULEBUDGET SCHEDULE page 421

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ADMINISTRATIVE EXPENSES BUDGET ADMINISTRATIVE EXPENSES BUDGET SCHEDULESCHEDULE

A statement prepared to show projected expenditures for all aoperating expenses not directly related to selling operations is called a administrative expenses budget scheduleBudget schedule uses information from:

Past recordsCompany plansSales & selling expenses budget schedulesDiscussions with other managers

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ADMINISTRATIVE EXPENSESADMINISTRATIVE EXPENSESBUDGET SCHEDULEBUDGET SCHEDULE page 423

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OTHER REVENUE & EXPENSES BUDGET OTHER REVENUE & EXPENSES BUDGET SCHEDULESCHEDULE

Budgeted revenue & expenses from activities other than normal operations are shown in a statement called other revenue & expenses budget scheduleTypical items in this budget are:

Interest incomeInterest expenseGains or losses on the sale of plant assets

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LESSON 14-2

OTHER REVENUE AND EXPENSES OTHER REVENUE AND EXPENSES BUDGET SCHEDULEBUDGET SCHEDULE page 424

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BUDGETED INCOME STATEMENTBUDGETED INCOME STATEMENT

A statement that shows a company’s projected sales, costs, expenses, & net income is called a budgeted income statementMost businesses will prepare a shortened

budgeted income statement & attach the budget schedules with the details

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1. Beginning inventory: 39,200 units $3.30 = $129,360

2. Ending inventory: 42,100 units $3.40 = $143,140

BUDGETED INCOME STATEMENTBUDGETED INCOME STATEMENT page 425

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LESSON 14-2

15% of net income before taxes, zero to $50,000.00.

25% of net income before taxes less $5,000.00, $50,001.00 to $75,000.00.

34% of net income before taxes less $11,750.00, $75,001.00 to $100,000.00.

39% of net income before taxes less $16,750.00, $100,001.00 to $335,000.00.

CALCULATING FEDERAL CALCULATING FEDERAL INCOME TAX EXPENSEINCOME TAX EXPENSE page 425

Amounts from the five budget schedules allow the company to project net income before federal income tax

This allow the company to estimate Federal income taxes using a tax rate table furnished by the IRS

Net Income before Federal Income Tax

Tax Rate =Federal IncomeTax Expense

$125,970 39% less $16,750 = $32,378.30rounded to $32,380

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LESSON 14-2

TERMS REVIEWTERMS REVIEW

sales budget schedule purchases budget schedule selling expenses budget schedule administrative expenses budget schedule other revenue and expenses budget schedule budgeted income statement

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