KRAUSE INDUSTRIES Balance Sheet December 31, 2013 Assets Current Assets Cash $7,
ID: 2456176 • 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)
32,460
Total current assets
$122,460
Property, Plant, and Equipment
Equipment
$41,230
Less: Accumulated depreciation
11,230
30,000
Total assets
$152,460
Liabilities and Stockholders' Equity
Liabilities
Notes payable
$26,230
Accounts payable
46,230
Total liabilities
72,460
Stockholders' Equity
Common stock
$48,770
Retained earnings
31,230
Total stockholders' equity
80,000
Total liabilities and stockholders' equity
$152,460
4th Qtr. of 2014
Year 2014 Total
(a)
Prepare a budgeted income statement for 2014.
Krause Industries’ balance sheet at December 31, 2013, is presented below.KRAUSE INDUSTRIES
Balance Sheet
December 31, 2013
Assets
Current Assets
Cash
$7,500
Accounts receivable
82,500
Finished goods inventory (2,000 units)
32,460
Total current assets
$122,460
Property, Plant, and Equipment
Equipment
$41,230
Less: Accumulated depreciation
11,230
30,000
Total assets
$152,460
Liabilities and Stockholders' Equity
Liabilities
Notes payable
$26,230
Accounts payable
46,230
Total liabilities
72,460
Stockholders' Equity
Common stock
$48,770
Retained earnings
31,230
Total stockholders' equity
80,000
Total liabilities and stockholders' equity
$152,460
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 14,540 69,400 Direct labor 12,500 56,600 Manufacturing overhead applied 10,000 52,770 Selling and administrative expenses 16,770 76,000To 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 $11,018 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 $20,230. It expects to pay $9,230 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 $6,930. In 2014, the company expects to declare and pay an $6,230 cash dividend. Unpaid income taxes at December 31 will be $6,230. The company’s cash budget shows an expected cash balance of $7,950 at December 31, 2014.
Explanation / Answer
Budgeted Income Statement For the Year Ending December 31, 2014 Sale 280000 Cost of goods sold: Beginning Inventory 32460 Add : Cost of Good Manufactured Direct materials used 69400 Direct labor 56600 Manufacturing overhead applied 52770 178770 Cost of Good Available for sale 211230 Less: Ending Inventory ( 20*3000) 60000 Cost of goods sold 151230 Gross profit 128770 Operating expenses: Selling and administrative expenses 76000 Earning before Interest & income tax 52770 Interest Expenses 3500 Income before income tax 49270 Tax Expenses (49270*40%) 19708 Net Income 29562
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