Problem 21-6A (Part Level Submission) Krause Industries’ balance sheet at Decemb
ID: 2579686 • Letter: P
Question
Problem 21-6A (Part Level Submission) Krause Industries’ balance sheet at December 31, 2016, is presented below.
To meet sales requirements and to have 2,500 units of finished goods on hand at December 31, 2017, the production budget shows 9,000 required units of output. The total unit cost of production is expected to be $18. Krause uses the first-in, first-out (FIFO) inventory costing method. Interest expense is expected to be $3,500 for the year. Income taxes are expected to be 40% of income before income taxes. In 2017, the company expects to declare and pay an $9,620 cash dividend.
The company’s cash budget shows an expected cash balance of $5,880 at December 31, 2017. 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 2017, the company expects to purchase additional equipment costing $11,890. $10,741 of depreciation expense on equipment is included in the budget data and split equally between manufacturing overhead and selling and administrative expenses. Krause expects to pay $9,720 on the outstanding notes payable balance plus all interest due and payable to December 31 (included in interest expense $3,500, above). Accounts payable at December 31, 2017, includes amounts due suppliers (see above) plus other accounts payable of $8,200. Unpaid income taxes at December 31 will be $6,020.
(B) Prepare a budgeted multi-step income statement for 2017.
(C) Prepare a retiained earnings statment for 2017
(D) Prepare a budgeted balance sheet
KRAUSE INDUSTRIES Balance Sheet December 31, 2016 Assets Current Assets Cash Accounts receivable Finished goods inventory (1,500 units) $7,500 73,500 25,460 106,460 Total current assets Property, Plant, and Equipment Equipment $40,580 Less: Accumulated depreciation 10,230 30,350 Total assets $136,810 Liabilities and Stockholders' Equity Liabilities Notes payable Accounts payable $27,580 45,500 73,080 Total liabilities Stockholders' Equity $36,240 27,490 Common stoc Retained earnings Total stockholders' equity 63,730 Total liabilities and stockholders' equity $136,810 Budgeted data for the year 2017 include the following 2017 Quarter 4 Total Sales budget (8,000 units at $32) Direct materials used Direct labor Manufacturing overhead applied Selling and administrative expenses $76,800 $256,000 62,500 50,900 48,800 75,000 12,010 12,500 10,000 17,040Explanation / Answer
Answer 1. Krause Industries Budgeted Cost of Goods Sold For The Year Ended Dec 31, 2017 Beginning Inventory - Jan 1, 2016 (1,500 Units) 25,460 Cost of Goods Manufactured: Direct Material 62,500 Direct Labor 50,900 Manufacturing Overhead Applied 48,800 162,200 Cost of Goods Available for Sale 187,660 Ending Inventory, Dec 31, 2017 (2,500 Units X $18) (45,000) Cost of Goods Sold 142,660 Answer 2. Krause Industries Budgeted Income Statement For The Year Ended Dec 31, 2017 Sales Revenue - 8,000 Units X $32 256,000 Cost of Goods Sold 142,660 Gross Margin 113,340 Selling & Administrative Expenses 75,000 Income From Operations 38,340 Interest Expense 3,500 Income before Income Taxes 34,840 Income Tax Expense - 40% 13,936 Net Income / (Loss) 20,904 Answer 3. Krause Industries Budgeted Retained Earnings Statement For The Year Ended Dec 31, 2017 Beginning Balance - Jan 1, 2017 27,490 Add: Net Income 20,904 48,394 Less: Dividend Paid (9,620) Ending Balance - Dec 31, 2017 38,774 Answer 4. Krause Industries Budgeted Cost of Goods Sold Dec 31, 2017 Assets Current Assets Cash 5,880 Accounts Receivable - $76,800 X 40% 30,720 Finished Goods Inventory - 2,500 Units 45,000 Total Current Assets 81,600 Property, Plant & Equipment Equipment 52,470 Less: Accumulated Depreciation (20,971) 31,499 Total Assets 113,099 Liabilities & Stockholders' Equity Current Liabilties Income Taxes Payable 6,020 Accounts Payable - $12,010 X 50% + $8,200 14,205 Total Current Liabilties 20,225 Notes Payable - $27,580 - $9,720 17,860 Total Liabilities 38,085 Stockholders' Equity Common Stock 36,240 Retained Earnings 38,774 Total Stockholders' Equity 75,014 Total Liabilities & Stockholders' Equity 113,099
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