Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales in $2020$ will be $$1\mathrm{.}5$ million. Interest expense is expected to remain unchanged at $$35,000,$ and the firm plans to pay $$70,000$ in 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 goods sold and operating expenses into their fixed and variable components are given below.

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 statement probably provides the better estimate of $2020$ income? Explain why.

$\backslash$table$[[\backslash$table$[[$Metroline Manufacturing$],[$Income Statement$],[$for the Year Ended December $31,2019]]],[$Sales revenue,,$400,000],[$Less: Cost of goods sold,,$910,000],[$Gross profits,S$,490,000],[$Less: Operating expenses,,$120,000],[$Operating profits,$$,370,000],[$Less: Interest expense,,$35,000],[$Net profits before taxes,$$,335,000],[$Less: Taxes rate $=40\%,,134,000],[$Net profits after taxes,$S,201,000],[$Less: Cash dividends,,$66,000],[$To retained earnings,$$,135,000]]$

$\backslash$table$[[\backslash$table$[[$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$