IntegrativePro forma statementsRed Queen Restaurants wishes to prepare financial plans. Use the financial statements and the other information provided here LOADING... to prepare the financial plans. The following financial data are also available for next year: (1) The firm has estimated that its sales will be . (2) The firm expects to pay in cash dividends. (3) The firm wishes to maintain a minimum cash balance of . (4) Accounts receivable represent approximately of annual sales. (5) The firm's ending inventory will change directly with changes in sales. (6) Red Queen will purchase new machine costing and have total depreciation of . (7) Accounts payable will change directly in response to changes in sales. (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 next year, using the percent-of-sales method.

b. Prepare a pro forma balance sheet for next year, using the judgmental approach.

c. Analyze these statements, and discuss the resulting external financing required.