The marketing department of Metroline Manufacturing estimates that its sales in 2020 will be $1.53 million. Interest expense is expected to remain unchanged at $31,000 and the firm plans to pay 69,000 in cash dividends during 2020. Metroline Manufacturing's income statement for the year ended December 31, 2019, is given
Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales in 2020 will be $1.53 million. Interest expense is expected to remain unchanged at $31,000, and the firm plans to pay $69,000 in cash dividends during 2020. Metroline Manufacturing's income statement for the year ended December 31, 2019, is given EEB. along with a breakdown of the firm's cost of goods sold and operating expenses into their fixed and variable components. a. Use the percont-of-salos 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. a. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2020 Complete the pro forma income statement for the year ended December 31, 2020 below: Round the percentage of sales to four decimal places and the pro forma income statement amounts to the nearest dollar.) Metroline Manufacturing Income Statement for the Year Ended December 31, 2019 Metroline Manufacturing Breakdown of Costs and Expenses into Fixed and Variable Components for the Year Ended December 31, 2019 $1,410,000 917,000 $493,000 115,000 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate 40%) Net profits after taxes Less: Cash dividends To retained earnings Cost of goods sold Fixed cost Variable cost $202,000 715,000 $917,000 $378,000 Total cost 31,000 Operating expenses $347,000 138,800 Fixed expenses Variable expenses $33,000 82,000 $115,000 $208,200 Total expenses 67,000 $141,200 Pro Forma Income Statement Metroline Manufacturing, Inc. for the Year Ended December 31, 2020 (based on fixed and variable cost data) Sales Less: Cost of goods sold Fixed cost Variable cost Gross profits Less: Operating expenses Fixed expense Variable expense Operating profits Less: Interest expense Net profits before taxes Less: Taxes Net profits after taxes Less: Cash dividends To retained earnings
