KRAUSE INDUSTRIES Balance Sheet December 31, 2013 Assets Current Assets Cash $7,
ID: 2461006 • Letter: K
Question
KRAUSE INDUSTRIES Balance Sheet December 31, 2013 Assets Current Assets Cash $7,500 Accounts receivable 82,500 Finished goods inventory (2,000 units) 33,040 Total current assets $123,040 Property, Plant, and Equipment Equipment $41,520 Less: Accumulated depreciation 11,520 30,000 Total assets $153,040 Liabilities and Stockholders' Equity Liabilities Notes payable $26,520 Accounts payable 46,520 Total liabilities 73,040 Stockholders' Equity Common stock $48,480 Retained earnings 31,520 Total stockholders' equity 80,000 Total liabilities and stockholders' equity $153,040 Additional information accumulated for the budgeting process is as follows. Budgeted data for the year 2014 include the following. 4th Qtr. of 2014 Year 2014 Total Sales budget (8,000 units at $35) $84,000 $280,000 Direct materials used 13,960 69,400 Direct labor 12,500 56,600 Manufacturing overhead applied 10,000 52,480 Selling and administrative expenses 16,480 76,000 To meet sales requirements and to have 3,000 units of finished goods on hand at December 31, 2014, the production budget shows 9,000 required units of output. The total unit cost of production is expected to be $20. Krause Industries uses the first-in, first-out (FIFO) inventory costing method. Selling and administrative expenses include $11,482 for depreciation on equipment. Interest expense is expected to be $3,500 for the year. Income taxes are expected to be 40% of income before income taxes. All sales and purchases are on account. It is expected that 60% of quarterly sales are collected in cash within the quarter and the remainder is collected in the following quarter. Direct materials purchased from suppliers are paid 50% in the quarter incurred and the remainder in the following quarter. Purchases in the fourth quarter were the same as the materials used. In 2014, the company expects to purchase additional equipment costing $20,520. It expects to pay $9,520 on notes payable plus all interest due and payable to December 31 (included in interest expense $3,500, above). Accounts payable at December 31, 2014, include amounts due suppliers (see above) plus other accounts payable of $7,220. In 2014, the company expects to declare and pay an $6,520 cash dividend. Unpaid income taxes at December 31 will be $6,520. The company’s cash budget shows an expected cash balance of $7,950 at December 31, 2014.
Explanation / Answer
Budgeted income statement for 2014:
Calculations:
1. opening inventory = 2000 units. sale = 8000 units and closing stock = 3000 units.
Units produced or purchased will be: sale+closing stock (requirement) - opening availability = 8,000+3,000 - 2,000 = 9,000 units.
2. Cost of goods sold calculation, ending inventory calculation:
Total goods manufcatured = 9,000 units. Its costs = direct labor+direct material+applied overheads = 69,400+56,600+52,480 = 178,480
Per unit cost = 178480/9000 = 19.8311 or around 20 as given in the question.
As FIFO is used, all the opening inventory will be sold first. What is left comprises only of production during the year. Its value = 3,000 units*19.8311 = 59,493.30
(Only income statement has been prepared, as the comment after the question has asked only for the income statement)
Particulars Formula Amount Amount Sales 8000*35 280,000.00 Cost of goods sold Opening finished goods (2,000 units) 33,040.00 Cost of goods manufactured/purchased (9,000 units) 69400+56600+52480 178,480.00 less: closing finished goods (3,000 units) 3000*19.8311 59,493.30 Cost of goods sold -152,026.70 Gross profit 127,973.30 Other expenses: SG&A expenses (excluding depreciation) 76000-11482 64,518.00 Depreciation 11,482.00 Interest expenses 3,500.00 Total other expenses -79,500.00 Profit before taxes 48,473.30 Tax amount 40% of 48473.3 19,389.32 -19,389.32 Profit after tax 29,083.98Related Questions
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