a. Prepare pro forma income statement for the year ended December 31, 2020, using the percent-of sales method.

b. Prepare pro forma balance sheet dated December 31, 2020, using the judgmental approach

c. Analyze these statements, and discuss the resulting external financing required. (Please explain and elaborate).

Use the following financial statements of Hakdogmie Cafe to prepare the financial plans.

Hakdogmie Cafe

Income Statement for the Year Ended December 31, 2019

Sales revenue 800,000

Cost of goods sold 500,000

Gross profits 300,000

Operating expenses 100,000

Net profits before taxes 200,000

Less: Taxes (rate 30%) 60,000

Net profits after taxes 140,000

Hakdogmie Cafe

Balance Sheet December 31, 2019

Assets

Cash 35,000

Marketable securities 20,000

Accounts receivable 150,000

Inventories 100,000

Total current assets 305,000

Fixed Assets 400,000

Accumulated Depreciation (75,000)

Net fixed assets 325,000

Total assets 630,000

Liabilities and Stockholders' Equity

Accounts payable 100,000

Taxes payable 30,000

Other current liabilities 10,000

Total current liabilities 140,000

Long-term debt 150,000

Common stock 150,000

Retained earnings 190,000

Total liabilities and stockholders' equity 630,000

The following financial data are also available:

(1) The firm has estimated that its sales for 2020 will be 900,000.

(2) The firm expects to pay 35,000 in cash dividends in 2020.

(3) The firm wishes to maintain a minimum cash balance of 35,000.

(4) Accounts receivable represent approximately 18% of annual sales.

(5) The firm's ending inventory will change directly with changes in sales in 2020.

(6) A new machine costing 45,000 will be purchased in 2020. Total depreciation for 2020 will be 18,000.

(7) Accounts payable will change directly in response to changes in sales in 2020.

(8) Taxes payable will equal one-fourth of the tax liability on the pro forma income statement.

(9) Other current liabilities will be 10% higher than last year

(10) Additional 2,000 long-term debt was acquired

(9) Marketable securities, and common stock will remain unchanged.