b. Pro Forma Income Statement

Metroline Maufacuturing, Inc.

Sales

Less: Cost of goods sold

Fixed Cost

Variable cost

Gross profits

Less: Operating expense:

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

Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales in 2020 will be $1.53 million. Interest expense is expected to remain unchanged at S39,000, and the firm plans to pay $72.000 in cash dividends during 2020. Metroline Manufacturing's income statement for the year ended December 31, 2019, ls given EB along with a breakdown of the firm's cost of goods sold and operating expenses into their fixed and variable components Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31 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. (Click on the icon located on the top-right corner of the data tables below in order to copy its contents into a spreadsheet.) Metroline Manufacturing Income Statement for the Year Ended December 31, 2019 Metroline Manufacturing Breakdown of Costs and Expenses into Fixed and Variable Components for the Year Ended December 31, 2019 $1,396,000 917.000 $479,000 112,000 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate = 40%) Net profits after taxes Less: Cash dividends To retained earnings Cost of goods sold Fixed cost Variable cost $213,000 704,000 $917,000 $367,000 Total cost 39,000 Operating expenses $328,000 131,200 Fixed expenses Variable expenses $34,000 78,000 $112,000 $196,800 Totalexpenses 69,000 $127,800 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 1% Less: Cost of goods sold Gross profits 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