The budget committee of SUppar Company collects the following data for its San Miguel store in preparing budgeted income statements for May and June 2017.

1. sales for may are expected to be 800,000. sales in June and July are expected to be 5% higher than the preceeding month.

2. Cost of good sold is expecte to be 75% of sales

3. Company policy is to maintain ending merchandise inventory at 10% of the following months cost of goods sold.

4. Operating expenses are estimated to be as follows:

sales

35,000 per month
advertising 6% of monthly sales
delivery expense 2% of monthly sales
sales commission 5% of monthly sales
rent expense 5,000 per month
depreciation 800 per month
utilites 600 per month
insurance 500 per month
interest expense is 2,000 per month. Income taxes are estimated to be 30% of income before income taxes.

a) prepare the merchandise purchases budget for each month in columnar form.

b) prepare budgeted multiple-step income statements for each month in columnar form. Show in the statements the details of cost of good sold.

a. prepare the merchandise purchases budget for each month in columnar form.

Sales for the month of May is given - $800,000

Since it increases by 5%,

Sales for June = $800,000 x 1.05 = $840,000

COGS: Sales x 75% = $800,000 x .75 = $600,000 (May)

= $840,000 x .75 = $630,000 (June)

Ending Inventory: COGS from next month x 10% = $630,000 x .10 = $63,000 (May)

= $661,500 x .10 = $66,150 (June)

Beginning Inventory: COGS x 10% = $600,000 x .10 = $60,000 (May)

                                          Merchandise Purchase Budget

                                                                               May                   June

Sales                                                                 $800,000          $840,000

COGS                                                                $600,000          $630,000

Add: Ending Inventory                                      $63,000            $66,150

Less: Beginning Inventory                                $60,000            $63,000

Merchandise Purchased                                   $603,000          $633,150

b) prepare budgeted multiple-step income statements for each month in columnar form. Show in the statements the details of cost of good sold.

Please find it attached as an image.