P4-16 Pro forma income statement The marketing department of Metroline Manufae turing estimates that its sales in 2020 will be $1.5 million. Interest expense is expected to remain unchanged at $35,000, and the firm plans to pay $70,000 ja cash dividends during 2020. Metroline Manufacturing's income statement for the year ended December 31, 2019, and a breakdown of the firm's cost of good sold and operating expenses into their fixed and variable components are given a. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2020. 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 state- ment probably provides the better estimate of 2020 income? Explain why. below Metroline Manufacturing Income Statement for the Year Ended December 31, 2019 Sales revenue $1,400,000 Less: Cost of goods sold 910,000 Gross profits $ 490,000 Less: Operating expenses 120,000 Operating profits $ 370,000 Les: Interest expense 35,000 Net profits before taxes $ 335,000 Less: Taxes (rate=40%) 134,000 Net profits after taxes $ 201,000 Less: Cash dividends 66,000 To retained earnings 135,000 Metroline Manufacturing Breakdown of Costs and Expenses into Fixed and Variable Components for the Year Ended December 31, 2019 Cost of goods sold Fixed cost $210,000 Variable cost 700,000 Total costs $910,000 Operating expenses Fixed expenses Variable expenses Total expenses $ 36,000 84,000 $120,000