Kurian Industries’ balance sheet at December 31, 2021, follows.

Budgeted data for the year 2022 include the following: 

To meet sales requirements and to have 3,000 units of finished goods on hand at December 31, 2022, the production budget shows 9,000 required units of output. The total unit cost of production is expected to be $18. Kurian Industries uses the first-in, first-out (FIFO) inventory costing method. Selling and administrative expenses include $4,000 for depreciation on equipment. The company expects interest expense to be $3,500 for the year and income taxes to be 30% of the income before income taxes. 

All sales and purchases are on account. The company expects to collect 60% of the quarterly sales in cash within the quarter and the remainder in the following quarter. It pays direct materials purchased from suppliers 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 2022, 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 the interest expense of $3,500, above). Accounts payable at December 31, 2022, will include amounts due to suppliers (see above) plus other accounts payable of $5,700. In 2022, 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 $9,750 at December 31, 2022. 

Instructions

Prepare a budgeted income statement for 2022 and a budgeted balance sheet at December 31, 2022. In preparing the income statement, you will need to calculate the cost of goods manufactured (materials + labour + overhead) and finished goods inventory (December 31, 2022).

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Equipment Current assets Cash Accounts receivable Finished goods inventory (2,000 units) Total current assets KURIAN INDUSTRIES Balance Sheet December 31, 2021 Less: Accumulated depreciation Total assets Liabilities Notes payable Accounts payable Total liabilities Shareholders' equity Common shares Assets $40,000 10,000 Liabilities and Shareholders' Equity Retained earnings Total shareholders' equity Total liabilities and shareholders' equity $50,000 30,000 $ 7,500 82,500 30,000 120,000 30,000 $150,000 $ 25,000 45,000 70,000 80,000 $150,000