1. CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 14-2 Budgeted Income Statement

2. CENTURY 21 ACCOUNTING © Thomson/South-Western SALES BUDGET SCHEDULE A statement that shows the projected net sales for a budget period is called a sales budget schedule Prepared first because the other schedules are affected by the projected net sales Projected 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 2 LESSON 14-2

3. CENTURY 21 ACCOUNTING © Thomson/South-Western 3 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 SCHEDULE page 419 1 6 3 5 4 2

4. CENTURY 21 ACCOUNTING © Thomson/South-Western PURCHASES 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 schedule Factors to consider when planning a purchases budget schedule: Projected unit sales The quantity of merchandise on hand at the beginning of the budget period 4 LESSON 14-2

5. CENTURY 21 ACCOUNTING © Thomson/South-Western 5 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 SCHEDULE page 420 1 2 3 4 5 7 6

6. CENTURY 21 ACCOUNTING © Thomson/South-Western SELLING EXPENSES BUDGET SCHEDULE A statement prepared to show projected expenditures related directly to the selling operations is called a selling expenses budget schedule Sales managers project the information for the selling expenses budget schedule by collaborating with other sales personnel Some selling expense items are relatively stable & require little budget planning (depreciation expense, insurance premiums) 6 LESSON 14-2

7. CENTURY 21 ACCOUNTING © Thomson/South-Western 7 LESSON 14-2 SELLING EXPENSES BUDGET SCHEDULE page 421

8. CENTURY 21 ACCOUNTING © Thomson/South-Western ADMINISTRATIVE EXPENSES BUDGET SCHEDULE A statement prepared to show projected expenditures for all aoperating expenses not directly related to selling operations is called a administrative expenses budget schedule Budget schedule uses information from: Past records Company plans Sales & selling expenses budget schedules Discussions with other managers 8 LESSON 14-2

9. CENTURY 21 ACCOUNTING © Thomson/South-Western 9 LESSON 14-2 ADMINISTRATIVE EXPENSES BUDGET SCHEDULE page 423

10. CENTURY 21 ACCOUNTING © Thomson/South-Western OTHER REVENUE & EXPENSES BUDGET SCHEDULE Budgeted revenue & expenses from activities other than normal operations are shown in a statement called other revenue & expenses budget schedule Typical items in this budget are: Interest income Interest expense Gains or losses on the sale of plant assets 10 LESSON 14-2

11. CENTURY 21 ACCOUNTING © Thomson/South-Western 11 LESSON 14-2 OTHER REVENUE AND EXPENSES BUDGET SCHEDULE page 424

12. CENTURY 21 ACCOUNTING © Thomson/South-Western BUDGETED INCOME STATEMENT A statement that shows a company’s projected sales, costs, expenses, & net income is called a budgeted income statement Most businesses will prepare a shortened budgeted income statement & attach the budget schedules with the details 12 LESSON 14-2

13. CENTURY 21 ACCOUNTING © Thomson/South-Western 13 LESSON 14-2 1.Beginning inventory: 39,200 units  $3.30 = $129,360 2.Ending inventory: 42,100 units  $3.40 = $143,140 BUDGETED INCOME STATEMENT page 425 1 2

14. CENTURY 21 ACCOUNTING © Thomson/South-Western 14 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 INCOME 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 Income Tax Expense  $125,97039% less $16,750=$32,378.30 rounded to $32,380 

15. CENTURY 21 ACCOUNTING © Thomson/South-Western 15 LESSON 14-2 TERMS REVIEW sales budget schedule purchases budget schedule selling expenses budget schedule administrative expenses budget schedule other revenue and expenses budget schedule budgeted income statement page 426