Problem:
(Pro forma income statement) Bennett Novelty Wholesale Store has prepared the following budget information for May 2001:
• Sales of $300,000. All sales are on account and a provision for bad debts is made monthly at 3 percent of sales.
• Inventory was $70,000 on April 30 and an increase of $10,000 is planned for May.
• All inventory is marked to sell at cost plus 50 percent.
• Estimated cash disbursements for selling and administrative expenses for the month are $40,000.
• Depreciation for May is projected at $5,000. Prepare a pro forma income statement for Bennett Novelty Wholesale Store for May 2001. (CPA adapted)