Integrativelong dashPro

forma statementsRed Queen Restaurants wishes to prepare financial plans. Use the financial statements and the other information provided here

to prepare the financial plans. The following financial data are also available:

(1) The firm has estimated that its sales for 2020 will be $899,200.

(2) The firm expects to pay $34,600 in cash dividends in 2020.

(3) The firm wishes to maintain a minimum cash balance of $30,100.

(4) Accounts receivable represent approximately 21% of annual sales.

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

(6) A new machine costing $42,300 will be purchased in 2020. Total depreciation for 2020 will be $16,700.

(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. (dollar amount)

Red Queen Restaurants Income Statement
for the Year Ended December 31, 2019
Sales revenue	$799,500
Less: Cost of goods sold	599,700
Gross profits	$199,800
Less: Operating expenses	99,600
Net profits before taxes	$100,200
Less: Taxes (rate equals 21 %rate=21%)	21,042
Net profits after taxes	$79,158
Less: Cash dividends	20,700
To retained earnings	$58,458

Red Queen Restaurants Balance Sheet December 31, 20192019
Assets			Liabilities and Stockholders' Equity
Cash	$31,700		Accounts payable	$100,700
Marketable securities	18,400		Taxes payable	19,800
Accounts receivable	151,000		Other current liabilities	4,400
Inventories	99,400		Total current liabilities	$124,900
Total current assets	$300,500		Long-term debt	$200,000
Net fixed assets	350,300		Common stock	$150,900
			Retained earnings	$175,000
Total assets	$650,800		Total liabilities and equity	$650,800