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 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.
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 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales in
along with a breakdown of the firm's cost of goods sold and operating expenses into their fixed and variable components.
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
LOADING...
,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.
Transcribed Image Text: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 Statement
Metroline Manufacturing, Inc.
for the Year Ended December 31, 2020
(percent-of-sales method)
Sales
$
Less: Cost of goods sold
%
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
%24
%24
%24
%24
Transcribed Image Text: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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