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Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales in 2020 will be $1

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Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales in 2020 will be $1.56 million. Interest expense is expected to remain unchanged at $39,000, and the firm plans to pay $75,000 in cash dividends during 2020. Metroline Manufacturing's income statement for the year ended December 31, 2019, is given along with a breakdown of the firm's cost of goods sold and operating expenses into their fixed and variable components. a. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2020 b. Use fixed and variable cost data to develop a pro forma income statement for the year ended December 31, 2020 c. Compare and contrast the statements developed in parts a. and b. Which statement probably provides the better estimate of 2020 income? Explain why.
i Data Table (For Income Staement, click on the icon here in order to copy the contents of the data table below into a spreadsheet.) (For Breakdown of Costs and Expenses, click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Metroline Manufacturing Metroline Manufacturing Income Statement Breakdown of Costs and Expenses for the Year Ended December 31, 2019 into Fixed and Variable Components Sales revenue $1,395,000 for the Year Ended December 31, 2019 Less: Cost of goods sold 906,000 Cost of goods sold Gross profits $489,000 Fixed cost $209,000 Less: Operating expenses 119,000 Variable cost 697,000 Operating profits $370,000 Total cost $906,000 Less: Interest expense 39,000 Operating expenses Net profits before taxes $331,000 Fixed expenses $40,000 Less: Taxes (rate=40%) 132,400 Variable expenses 79,000 Net profits after taxes $198,600 Total expenses $119,000 Less: Cash dividends 63,000 To retained earnings $135,600 Print Done
a. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2020. Complete the pro forma income statement for the year ended December 31, 2020 below: (Round the percentage of sales to four decimal places and the pro forma income statement amounts to the nearest dollar.) Pro Forma Income Statement Metroline Manufacturing, Inc. for the Year Ended December 31, 2020 (percent-of-sales method) Sales $ % $ Less: Cost of goods sold Gross profits Less: Operating expenses Operating profits Less: Interest expense Net profits before taxes $ $ Less: Taxes Net profits after taxes $ Less: Cash dividends To retained earnings $
b. Use fixed and variable cost data to develop a pro forma income statement for the year ended December 31, 2020. Complete the pro forma income statement for the year ended December 31, 2020 below: (Round the percentage of sales to four decimal places and the pro forma income statement amounts to the nearest dollar.) Pro Forma Income Statement Metroline Manufacturing, Inc. for the Year Ended December 31, 2020 (based on fixed and variable cost data) Sales $ Less: Cost of goods sold Fixed cost Variable cost % % $ Gross profits Less: Operating expenses Fixed expense Variable expense Operating profits Less: Interest expense Net profits before taxes Less: Taxes Net profits after taxes Less: Cash dividends $ $ To retained earnings $
c. Compare and contrast the statements developed in parts a. and b. Which statement probably provides the better estimate of 2020 income? Explain why. (Select from the drop-down menus.) Higher or Lower Higher or Lower The pro forma income statement developed using the fixed and variable cost data projects a net profit after taxes due to V cost of goods sold and operating expenses Although the percent-of-sales method projects a more estimate of net profit after taxes, the pro forma income statement that classifies fixed and variable cost is accurate Conservative or Aggresive Less or More