Answered: Use the percent-of-sales method to…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter5: The Income Statement And The Statement Of Cash Flows

Section: Chapter Questions

Problem 1RE: Brandt Corporation had sales revenue of 500,000 for the current year. For the year, its cost of...

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Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2021, for Hennesaw Lumber, Inc.

Hennesaw Lumber, Inc. estimates that its sales in 2021 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 2021. Hennesaw Lumber, Inc.'s income statement for the year ended December 31, 2020 is shown below. The pro forma net profits after taxes for 2015 are _____

Income Statement
Hennesaw Lumber, Inc.
For the Year Ended December 31, 2020
Sales Revenue
$4,200,000
Less: Cost of goods sold
3,570,000
Gross profits
$ 630,000
Less: Operating expenses
210,000
Operating profits
$ 420,000
Less: Interest expense
105,000
Net profit before taxes
$ 315,000
Less: Taxes (40%)
126,000
Net profits after taxes
$ 189,000
Less: Cash Dividends
120,000
To: Retained earnings
2$
69,000
%24

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