1 Please do the calculations prepare a projected multiple st

is in its third year of operations The following is the single step income statement for the year ended December 31, 2016 Your sister operates Hercules Parts Company, a mail order boat parts distributorship that Hercules Parts Company Income Statement Year Ended December 31, 2016 Revenues Net sales revenue $600,000 0 Expenses S 420,000 S 38,850 S 20,000.00 S 7,000.00 S 31,200 S 2,800.00 10,000.00 Cost of goods sold Sales salaries expense 3Freight out expense (shipping charges) Advertising Expense Office salaries expense Office supplies expense Interest Expense B Total Expenses $529,850 Net Income 70,150 Your sister had the following inventory balances: 21/01/16 12/31/16 Projected inventory as of 12/31/17 S 38,000.00 S 44,000.00 S 18,000.00 Your sister is considering a proposal to increase net income by offering their sales representatives a salary commission on every unit they sell. This should help increase sales. They also will be able to bargain for a better purchase price for their inventory, control their inventory more efficiently by adopting just-in-time inventory and by shipping all merchandise FOB Shipping Point. Presently, all merchandise is shipped FOB Destination. (Assume that the interest expense will remain the same in 2017). It is estimated that more creative marketing (in 2017) will enable Hercules to have a 20% increase in the Net Sales they had in 2016 by attracting new customers Assume the new shipping terms (in 2017) will cause Hercules to have 15% decrease in the Net Sales they had in 2016. Due to intense negotiations Hercules was able to reduce the cost of goods sold to 65% of Net Sales Assume that Sales Salaries Expense, Advertising Expense, Office Salaries Expense and Office Suppes Expense wil al increase by 10% s me that a sales representatives wi now receive a 5% comission on every sales dollar This will create a new expense that we will call Sales Commission Expense Reauire 1. Prepare a oroiected multole steo income statement for the vear ended Sheeti Sheet2 Sheet3 ADy

Solution

1. Projected Multiple step Income Statement of Hercules Parts Company for the year ended on 31st December       2017.

Sales (2016)                                                                                       $6,00,000

Increase by 20% due to creative marketing                                            $1,20,000

Decrease by 15% due to new shipping terms                                       ($90,000)

Net Sales (Projected for 2017)                                                                                                 $6,30,000

Less:

Cost of Goods sold (65% of Net Sales)                                                  ($4,09,500)

Sales Salaries expense ( Increase by 10%)                                            ($42,735)

Freight out Expenses (Assumed to be increased with increase in sales)    ($21,000)

Advertising Expenses (Increase by 10%)                                                 ($7,700)

Office Salaries Expenses (Increase by 10%)                                            ($34,320)

Office supplies Expense (Increase by 10%)                                              ($3,080)

Interest Expense (Same as previous year)                                                ($10,000)

Sales Commission Expense (5% of Sales)                                               ($31,500)

Total Expenses                                                                                                                ($5,59,835)

NET INCOME                                                                                                                    $70,165

2. Vertical analysis Statement showing Income statement of 2016 and 2017:

Particulars                                                                                    2016                                   2017

Net Sales                                                                                  $6,00,000                             $6,30,000

Less:

Cost of Goods Sold                                                                   ($4,20,000)                           ($4,09,500)

Sales Salaries expense                                                             ($38,850)                              ($42,735)

Freight out Expense                                                                  ($20,000)                              ($21,000)

Advertising Expenses                                                                ($7,000)                                ($7,700)

Office Salaries Expenses ($31,200)                              ($34,320)

Office supplies Expense                                                             ($2,800)                               ($3,080)

Interest Expense                                                                        ($10,000)                             ($10,000)

Sales Commission Expense                                                           -                                      ($31,500)

NET INCOME                                                                             $70,150                               $70,165