In: Finance
Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales in 2020 will be $ 1.64 million. Interest expense is expected to remain unchanged at $ 38 comma 000 , and the firm plans to pay $ 74 comma 000 in cash dividends during 2020. Metroline Manufacturing's income statement for the year ended December 31, 2019 , is given LOADING... , 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.
etroline Manufacturing Income Statement for the Year Ended December 31, 20192019 |
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Sales revenue |
$1,396,000 |
|
Less: Cost of goods sold |
917,000 |
|
Gross profits |
$479,000 |
|
Less: Operating expenses |
110,000 |
|
Operating profits |
$369,000 |
|
Less: Interest expense |
38,000 |
|
Net profits before taxes |
$331,000 |
|
Less: Taxes
(rate equals 40 %rate=40% ) |
132,400 |
|
Net profits after taxes |
$198,600 |
|
Less: Cash dividends |
65,000 |
|
To retained earnings |
$133,600 |
Metroline Manufacturing Breakdown of Costs and Expenses into Fixed and Variable Components for the Year Ended December 31, 20192019 |
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Cost of goods sold |
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Fixed cost |
$216,000 |
|
Variable cost |
701,000 |
|
Total cost |
$917,000 |
|
Operating expenses |
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Fixed expenses |
$35,000 |
|
Variable expenses |
75,000 |
|
Total expenses |
$110,000 |
SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE
I DID SIMILAR SUM EARLIER, WHERE ANSWER WAS ASKED IN DOLLARS. SO ROUNDED TO ZERO DECIMAL
ANS % IN 4 DECIMALS