***(Round the percentage of sales to four decimal places and the pro forma income statement amounts to the nearest dollar.)***

Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales in 2020 will be $1.69 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, is given , along with a breakdown of the firm's cost of goods sold and operating expenses into their fixed and variable components. 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. Metroline Manufacturing Metroline Manufacturing Income Statement Breakdown of Costs and Expenses for the Year Ended December 31, 2019 into Fixed and Variable Components Sales revenue $1,408,000 for the Year Ended December 31, 2019 Less: Cost of goods sold 914,000 Cost of goods sold Gross profits $494,000 Fixed cost $219,000 Less: Operating expenses 110,000 Variable cost 695,000 Operating profits $384,000 Total cost $914,000 Less: Interest expense 35,000 Operating expenses Net profits before taxes $349,000 Fixed expenses $31,000 Less: Taxes (rate = 40%) 139,600 Variable expenses 79,000 Net profits after taxes $209,400 Total expenses $110,000 Less: Cash dividends 60,000 To retained earnings $149,400 Pro Forma Income Statement Metroline Manufacturing, Inc. for the Year Ended December 31, 2020 (percent-of-sales method) Sales Less: Cost of goods sold A Gross profits Less: Operating expenses % Operating profits Less: Interest expense Net profits before taxes Less: Taxes Net profits after taxes Less: Cash dividends To retained earnings