Question

Calgary Industries is preparing a budgeted income statement for 2018. Predicted sales for the year are $760,000 and cost of goods sold is 40% of sales. The expected selling expenses are $84,000 and the expected general and administrative expenses are $93,000, which includes $26,000 of depreciation. The company's income tax rate is 30%. The budgeted net income for 2018 is:

Answer 1

The budgeted net income for Calgary Industries in 2018 is calculated by subtracting the cost of goods sold, selling expenses, and general and administrative expenses from the sales, and then accounting for taxes, which results in a net income of $195,300.

Step-by-step explanation:

To calculate the budgeted net income for Calgary Industries in 2018, we will follow these steps:

• Calculate the cost of goods sold (COGS) by taking 40% of predicted sales: 0.40 × $760,000
• = $304,000.
• Determine the gross profit by subtracting COGS from sales: $760,000 - $304,000 = $456,000.
• Subtract selling expenses and general and administrative expenses from the gross profit:
• $456,000 - $84,000 - $93,000 = $279,000.
• Since depreciation is a non-cash expense and already included in the general and administrative expenses, it doesn't need to be subtracted again. Calculate the income before tax by using the remaining amount: $279,000.
• Finally, calculate the net income by subtracting taxes (30% of income before tax):
• $279,000 - (0.30 × $279,000) = $279,000 - $83,700
• = $195,300.

The budgeted net income for 2018 is $195,300.

Answer 2

The budgeted net income for 2018 is : $195,300

Step-by-step explanation:

Prepare the budgeted income statement for 2018 as follows :

Sales $760,000

Less Cost of Sales ($760,000 × 40%) ($304,000)

Gross Profit $456,000

Less Expenses :

Selling Expenses ($84,000)

General and administrative ($93,000)

Net Income before tax $279,000

Income tax expense ($279,000 × 30%) ($83,700)

Net Income for the year $195,300

Conclusion :

The budgeted net income for 2018 is : $195,300