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 cost of goods sold for 2010 is ________. (See Table 4.4)

Question

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 cost of goods sold for 2010 is ________. (See Table 4.4)

Quizplus · Accepted Answer

Using the percent-of-sales method, the cost of goods sold is estimated at 85% of sales ($4,500,000 x 0.85 = $3,825,000). Therefore, the correct answer is C) $3,825,000.

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