Table 4.4 Use the Percent-Of-Sales Method to Prepare a Pro Forma Income

question 171

Multiple Choice

Table 4.4
Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2010, for Hennesaw Lumber, Inc.
Hennesaw Lumber, Inc. estimates that its sales in 2000 will be $4,500,000. Interest expense is to remain unchanged at $105,000 and the firm plans to pay cash dividends of $150,000 during 2010. Hennesaw Lumber, Inc.'s income statement for the year ended December 31, 2009 is shown below. From your preparation of the pro forma income statement, answer the following multiple choice questions.
-The pro forma net profits after taxes for 2010 are ________. (See Table 4.4)

• A) $202,500
• B) $207,000
• C) $52,500
• D) $57,000

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Definitions:

Auto Insurance

A type of insurance policy that covers vehicles and their drivers against potential financial losses related to accidents, theft, or damage.

Commercial Business

An organization engaged in activities aimed at the sale of goods and services to consumers with the goal of earning profit.

Insurable Interests

A legal requirement indicating that a person must have a legitimate stake in the safety or preservation of an item or life to insure it.

Investment Lenders

Professionals or institutions that provide capital to companies, individuals, or investors in exchange for interest payments and repayment of the principal at a future date.