Pro 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 $899,400.

(2) The firm expects to pay $34,200 in cash dividends in 2020.

(3) The firm wishes to maintain a minimum cash balance of $31,600.

(4) Accounts receivable represent approximately 22% of annual sales.

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

(6) A new machine costing $42,500 will be purchased in 2020. Total depreciation for 2020 will be $16,800.

(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-sale 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 Less: Cost of goods sold Gross profits Less: Operating expenses Net profits before taxes Less: Taxes (rate= 21 %) Net profits after taxes Less: Cash dividends To retained earnings $800,000 599,000 $201,000 99,600 $101,400 21,294 $80,106 20,200 $59,906 Red Queen Restaurants Balance Sheet December 31, 2019 Assets Cash Marketable securitie Accounts Inventories Liabilities and Stockholders' Equity $32,100 Accounts payable $100,300 20,400 4,300 $125,000 $199,100 $150,900 $175,000 $650,000 17,900 150,000 99,100 Taxes payable Other current liabilities eceivable Total current liabilities $299,100 Long-term debt 350,900 Common stock Total current assets Net fixed assets Retained earnings Total liabilities and equity Total assets $650,000