Krause Industries€™ balance sheet at December 31, 2012, is presented below.

Additional information accumulated for the budgeting process is as follows. Budgeted data for the year 2013 include the following.

To meet sales requirements and to have 3,000 units of finished goods on hand at December 31, 2013, 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 $4,000 for depreciation on equipment. Interest expense is expected to be $3,500 for the year. Income taxes are expected to be 30% 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 2013, the company expects to purchase additional equipment costing $19,000. It expects to pay $8,000 on notes payable plus all interest due and payable to December 31 (included in interest expense $3,500, above). Accounts payable at December 31, 2013, includes amounts due suppliers (see above) plus other accounts payable of $5,700. In 2013, the company expects to declare and pay a $5,000 cash dividend. Unpaid income taxes at December 31 will be $5,000. The company€™s cash budget shows an expected cash balance of $7,950 at December 31, 2013.

Instructions
Prepare a budgeted income statement for 2013 and a budgeted balance sheet at December 31, 2013. In preparing the income statement, you will need to compute cost of goods manufactured (direct materials + direct labor + manufacturing overhead) and finished goods inventory (December 31, 2013).

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KRAUSE INDUSTRIES Balance Sheet December 31, 2012 Assets Current assets Accounts receivable Finished goods inventory (2,000 units) 7,500 82,500 30,000 Total current assets 120,000 Property, plant, and equipment Equipment Less: Accumulated depreciation $40,000 10,000 30,000 Total assets Liabilities and Stockholders' Equity Liabilities Notes payable 25,000 45,000 Accounts payable Total liabilities Stockholders' equity 70,000 $50,000 30,000 Retained earnings Total stockholders' equity 0,000 150,000 Total liabilities and stockholders' equity Year 2013 Total Sales budget (8,000 units at $35) Direct materials used Direct labor Manufacturing overhead applied Selling and administrative expenses 4th Qtr of 2013 $84,000 17,000 12,500 10,000 18,000 $280,000 69,400 56,600 54,000 76,000