Question

Budgeted Income Statement Coral Seas Jewelry Company makes and sells costume jewelry. For the coming year, Coral Seas expects sales of $19,700,000 and cost of goods sold of $10,835,000. Advertising is a key part of Coral Seas' business strategy, and total marketing expense for the year is budgeted at $3,546,000. Total administrative expenses are expected to be $788,000. Coral Seas has no interest expense. Income taxes are paid at the rate of 40 percent of operating income.

Required:
Construct a budgeted income statement for Coral Seas Jewelry Company for the coming year. Enter your answers in dollars and not in millions.

Answer 1

Answer:

The budgeted net income for the coming year is $2,718,600.

Explanation:

The budgeted income statement for Coral Seas Jewelry Company for the coming year can be constructed as follows:

        Coral Seas Jewelry Company

         Budgeted Income Statement

                For the Coming Year

Details                                         Amount ($)    

Sales                                           19,700,000

Cost of Goods Sold                  (10,835,000)  

Gross Margin                              8,865,000

Marketing Expenses                 (3,546,000)  

Administrative Expenses            (788,000)  

Operating income                       4,531,000

Income Tax (40%)                      (1,812,400)  

Net Income                                 2,718,600