The cash budget for Parker Processed Meats, Inc. is given below ...

[09madisonrousseau09]

The cash budget for Parker Processed Meats, Inc. is given below for the fourth quarter of 2010:
 
  Parker Processed Meats, Inc.
  Cash Budget for the Three Months Ending December 31, 2010
  Cash receipts Oct. Nov. Dec.
  Total collections 37,050 48,075 69,750
  Cash disbursements:
  Purchases 45,780 50,800 54,250
  Wages and salaries 8,500 8,500 8,500
  Other expenses 4,025 2,350 975
  Taxes 16,350
  Total disbursements 54,000 57,375 78,165
  The expected sales for the period are as follows:
  Oct.: 116,000 Nov.: 127,000 Dec.: 95,000
  The total depreciation expense for the period will be 12,000.
  An interest payment on outstanding debt of 13,000 will be made in December. Using the information given
  above, construct a pro forma income statement for the final quarter of 2010.

Question 2

The moderate view of capital structure theory allows for the tax-deductibility of interest expense.
 
  Indicate whether the statement is true or false

[fraziera112]

Answer to Question 1

Parker Processed Meats, Inc.
Pro Forma Income Statement
For the Quarter Ended December 31, 2008
Sales 338,000
Less: Cost of goods sold 150,830
Gross profits 187,170
Less:
Depreciation expense 12,000
Wages and salaries 25,500
Other expenses 7,350
Net operating income 142,320
Less: interest expense 13,000
Earnings before taxes 129,320
Less: Income taxes 16,350
Net income 112,970

Answer to Question 2

TRUE