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

question 16

Multiple Choice

Table 4.4
Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31,2019,for Hennesaw Lumber,Inc.
Hennesaw Lumber,Inc.estimates that its sales in 2019 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 2019.Hennesaw Lumber,Inc.'s income statement for the year ended December 31,2018 is shown below.From your preparation of the pro forma income statement,answer the following multiple choice questions.
-The amount that will transfer from the 2019 income statement to the 2019 balance sheet as an addition to retained earnings is ________.(See Table 4.4)

• A)$150,000
• B)$57,000
• C)$122,550
• D)$272,550

---

Definitions:

Legal Ceiling Price

A maximum price set by government regulation that sellers are allowed to charge for a good or service, intended to protect consumers from excessive pricing.

Equilibrium Price

The rate at which the amount of a product supplied matches the amount of the product demanded.

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers, resulting in a stable market condition.

Demand Equation

A mathematical formula representing the relationship between the quantity demanded of a good and its price, along with other factors like income and price of related goods.