Question

Hennesaw Lumber, Inc. estimates that its sales in 2015 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 2015. Hennesaw Lumber, Inc.'s income statement for the year ended December 31, 2014 is shown below. From your preparation of the pro forma income statement, answer the following.

The pro forma net profits after taxes for 2015 are ________.
A) $202,500
B) $207,000
C) $52,500
D) $57,000

Answer 1

The pro forma net profits after taxes for 2015 are $207,000.

Step-by-step explanation:

Hennesaw Lumber Inc.

Proforma Income Statement

Sales $ 4,500,000

Cost of Goods Sold $3,825,000

(3,570,000/4,200,000*4,500,000)

Gross Profit $675,000

Operating Expenses $450,000

(210,000/4,200,000*4,500,000 )

Interest Expense $105,000

Net Profit before Taxes $345,000

Taxes (40%) $138,000

Net Profit after Taxes $207,000

Therefore, The pro forma net profits after taxes for 2015 are $207,000.