The 2010 sales forecast for Clearwater Development Co. is $150 million. Interest expense will not change in the coming year. Use Clearwater’s 2009 income statement ($ in thousands) presented below to...

The 2010 sales forecast for Clearwater Development Co. is $150 million. Interest expense will not change in the coming year. Use Clearwater’s 2009 income statement ($ in thousands) presented below to answer the questions that follow. Clearwater Development Co. Income Statement Sales $125,000 Less: Cost of goods sold 80,000 Gross profi t $ 45,000 Less: Operating expenses 30,000 Less: Interest 10,000 Pretax profi t $ 5,000 Less: Taxes (35%) 1,750 Net income $ 3,250 a. Use the percentage-of-sales method to construct a pro forma income statement for 2010. b. You learn that 25 percent of the cost of goods sold and operating expense fi gures for 2009 are fi xed costs that will not change in 2010. Reconstruct the pro forma income statement. c. Compare and contrast the statement prepared in parts (a) and (b). Which statement will likely provide the better estimate of 2010 income? Explain.