financial plans. 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 $35,200 in cash dividends in 2020. (3) The firm wishes to maintain a minimum cash balance of $31,600. (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 $42,400 will be purchased in 2020. Total depreciation for 2020 will be $15,000. (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) Marketable securities, other current liabilities, long-term debt, and common stock will remain unchanged. a. Prepare a pro forma income statement for the year ended December 31, 2020, using the percent-of-sales method. b. Prepare a pro forma balance sheet dated December 31, 2020, using the judgmental approach. c. Analyze these statements, and discuss the resulting external financing required. Red Queen Restaurants Income Statement for the Year Ended December 31, 2019 Sales revenue $799,800 Less: Cost of goods sold 599,900 Gross profits $199,900 Less: Operating expenses 99,300 Net profits before taxes $100,600 Less: Taxes (rate = 21%) 21,126 Net profits after taxes $79,474 Less: Cash dividends 19,300 To retained earnings $60,174 Red Queen Restaurants Balance Sheet December 31, 2019 Assets Liabilities and Stockholders' Equity Cash $32,300 Accounts payable $99,700 Marketable securities 18,600 Taxes payable 19,900 Accounts receivable 149,800 Other current liabilities 4,000 Inventories 99,000 Total current liabilities $123,600 Total current assets $299,700 Long-term debt $200,700 Net fixed assets 349,400 Common stock $149,800 Retained earnings $175,000 Total assets $649,100 Total liabilities and equity $649,100 financial plans. 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 $35,200 in cash dividends in 2020. (3) The firm wishes to maintain a minimum cash balance of $31,600. (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 $42,400 will be purchased in 2020. Total depreciation for 2020 will be $15,000. (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) Marketable securities, other current liabilities, long-term debt, and common stock will remain unchanged. a. Prepare a pro forma income statement for the year ended December 31, 2020, using the percent-of-sales method. b. Prepare a pro forma balance sheet dated December 31, 2020, using the judgmental approach. c. Analyze these statements, and discuss the resulting external financing required. Red Queen Restaurants Income Statement for the Year Ended December 31, 2019 Sales revenue $799,800 Less: Cost of goods sold 599,900 Gross profits $199,900 Less: Operating expenses 99,300 Net profits before taxes $100,600 Less: Taxes (rate = 21%) 21,126 Net profits after taxes $79,474 Less: Cash dividends 19,300 To retained earnings $60,174 Red Queen Restaurants Balance Sheet December 31, 2019 Assets Liabilities and Stockholders' Equity Cash $32,300 Accounts payable $99,700 Marketable securities 18,600 Taxes payable 19,900 Accounts receivable 149,800 Other current liabilities 4,000 Inventories 99,000 Total current liabilities $123,600 Total current assets $299,700 Long-term debt $200,700 Net fixed assets 349,400 Common stock $149,800 Retained earnings $175,000 Total assets $649,100 Total liabilities and equity $649,100