Question

ANSWER ALL PARTS

P4-16 (similar to) Question Help Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales in 2020 will be $1.57 million. Interest expense is expected to remain unchanged at $39,000, and the firm plans to pay $68,000 in cash dividends during 2020. Metroline Manufacturing's income statement for the year ended December 31, 2019, is given B. 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. i Data Table (Click on the icon located on the top-right corner of the data tables below in order to copy ils contents into a spreadsheet.) (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 Metroline Manufacturing Income Statement for the Year Ended December 31, 2019 Sales revenue $1,405,000 Less: Cost of goods sold 918,000 Gross profits S487,000 Less: Operating expenses 110,000 Operating profits $377,000 Less: Interest expense 39,000 Net profits before taxes $338,000 Less: Taxes (rate = 40%) 135,200 Net profits after taxes S202,800 Less: Cash dividends 63,000 To retained earnings $139,800 Metroline Manufacturing Breakdown of Costs and Expenses into Fixed and Variable Components for the Year Ended December 31, 2019 Cost of goods sold Fixed cost $215,000 Variable cost 703,000 Total cost $918,000 Operating expenses Fixed expenses $35,000 Variable expenses 75,000 Total expenses $110,000 To retained eamings Enter any number in the edit fields and then click Check Answer. 2 parts 2 remaining

Answer 1

Please find below the income statement for the metroline manufacturing

Particulars income statement for 2020	Amount	percentage
Sales	1570000
Less: Cost of goods sold	1025807.8	65.33%
Gross profits	544192.2
Less: operating Expenses	122918	7.83%
operating profits	421274.2
Less: interest Expense	39000
Net profit before tax	382274.2
Less: taxes (@40%)	152909.68
Net Profit after taxes	229364.52
Less: Cash Dividends	68000
Retained Earnings	161364.52

Split up of cost of goods sold and operating expenses:

Cost of goods sold
Fixed	215000
Variable	810807.8
Total	1025807.8
Operating Expenses
Fixed	35000
Variable	87918
Total	122918

As the fixed expenses in both the heads (COGS and opex) will be the same and only the variable expenses will change