to prepare the financial plans. The following financial data IntegrativePro forma statements Red Queen Restaurants wishes to prepare financial plans. Use the financial statements and the other information provided here are also available for next year: (1) The firm has estimated that its sales will be $899, 100. (2) The firm expects to pay $35,000 in cash dividends. (3) The firm wishes to maintain a minimum cash balance of $30,700. (4) Accounts receivable represent approximately 24% of annual sales. (5) The firm's ending inventory will change directly with changes in sales. (6) Red Queen will purchase new machine costing $43,800 and have total depreciation of $15,100. (7) Accounts payable will change directly in response to changes in sales. (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 next year, using the percent-of-sales method. b. Prepare a pro forma balance sheet for next year, using the judgmental approach. c. Analyze these statements, and discuss the resulting external financing required. Red Queen Restaurants Income Statement for the Year Just Ended Sales revenue $800,000 Less: Cost of goods sold 599,500 Gross profits $200,500 Less: Operating expenses 99,700 Net profits before taxes $100,800 Less: Taxes (rate = 40%) 40,320 Net profits after taxes $60,480 Less: Cash dividends 20,900 To retained earnings $39,580 (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Red Queen Restaurants Balance Sheet for the Year Just Ended Assets Liabilities and Stockholders' Equity Cash $32,000 Accounts payable $99,000 Marketable securities 17,600 Taxes payable 21,000 Accounts receivable 150,000 Other current liabilities 4,200 Inventories 100,800 Total current liabilities $124,200 Total current assets $300,400 Long-term debt $200,700 Net fixed assets 350,200 Common stock $150,700 Retained earnings $175,000 Total assets $650,600 Total liabilities and equity $650,600 Pro Forma Income Statement Red Queen Restaurants (percent-of-sales method) Sales $ Less: Cost of goods sold $ % Gross profits $ Less: Operating expenses $ % Net profits before taxes $ Less: Taxes (rate = 40%) $ Net profits after taxes $ Less: Cash dividends $ To Retained earnings $