Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales in2020will be$1.59million. Interest expense is expected to remain unchanged at$36,000,and the firm plans to pay$66,000in cash dividends during2020.Metroline Manufacturing's income statement for the year ended December 31,2019,is givenLOADING...,along with a breakdown of the firm's cost of goods sold and operating expenses into their fixed and variable components. a. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31,2020.b. Use fixed and variable cost data to develop a pro forma income statement for the year ended December 31,2020.c. Compare and contrast the statements developed in parts a. and b. Which statement probably provides the better estimate of2020income? Explain why. a. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2020.Complete the pro forma income statement for the year ended December 31, 2020 below: (Round the percentage of sales to four decimal places and the pro forma income statement amounts to the nearest dollar.)Pro Forma Income StatementMetroline Manufacturing, Inc.for the Year Ended December 31, 2020(percent-of-sales method)Sales$Less: Cost of goods sold%Gross profitsLess: Operating expenses%Operating profitsLess: Interest expenseNet profits before taxesLess: TaxesNet profits after taxes$Less: Cash dividendsTo retained earnings%24%24%24%24 Data Table(For Income Staement, click on the icon here O in order to copy the contents of the data table below into a spreadsheet.)(For Breakdown of Costs and Expenses, click on the icon here O in order to copy the contents of the data table below into aspreadsheet.)Metroline ManufacturingMetroline ManufacturingBreakdown of Costs and Expensesinto Fixed and Variable Componentsfor the Year Ended December 31, 2019Income Statementfor the Year Ended December 31, 2019$1,402,000910,000 Cost of goods soldSales revenueLess: Cost of goods soldGross profitsLess: Operating expenses$492,000Fixed cost$215,000126,000Variable cost695,000$366,000 Total cost36,000 Operating expenses$910,000Operating profitsLess: Interest expenseNet profits before taxesLess: Taxes (rate = 40%)$330,000Fixed expenses$32,000132,000Variable expenses94,000Net profits after taxes$198,000 Total expenses$126,000Less: Cash dividends70,000To retained earnings$128,000

Cost of goods sold percentage based on sales : Cost of goods sold * 100 / Sales revenue

Answered: Pro forma income statement The…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 40E: Cuneo Companys income statements for the last 3 years are as follows: Refer to the information for...

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Question

Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales in

2020

will be

$1.59

million. Interest expense is expected to remain unchanged at

$36,000,

and the firm plans to pay

$66,000

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.

Data Table
(For Income Staement, click on the icon here O in order to copy the contents of the data table below into a spreadsheet.)
(For Breakdown of Costs and Expenses, click on the icon here O in order to copy the contents of the data table below into a
spreadsheet.)
Metroline Manufacturing
Metroline Manufacturing
Breakdown of Costs and Expenses
into Fixed and Variable Components
for the Year Ended December 31, 2019
Income Statement
for the Year Ended December 31, 2019
$1,402,000
910,000 Cost of goods sold
Sales revenue
Less: Cost of goods sold
Gross profits
Less: Operating expenses
$492,000
Fixed cost
$215,000
126,000
Variable cost
695,000
$366,000 Total cost
36,000 Operating expenses
$910,000
Operating profits
Less: Interest expense
Net profits before taxes
Less: Taxes (rate = 40%)
$330,000
Fixed expenses
$32,000
132,000
Variable expenses
94,000
Net profits after taxes
$198,000 Total expenses
$126,000
Less: Cash dividends
70,000
To retained earnings
$128,000

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