21-6A (Part Level Submission)

Krause Industries' balance sheet at December 31, 2016, is presented below.

KRAUSE INDUSTRIES

Balance Sheet

December 31, 2016

Assets

Current Assets

Cash

$7,500

Accounts receivable

73,500

Finished goods inventory (1,500units)

26,190

Total current assets

107,190

Property, Plant, and Equipment

Equipment

$40,580

Less: Accumulated depreciation

10,980

29,600

Total assets

$136,790

Liabilities and Stockholders' Equity

Liabilities

Notes payable

$26,260

Accounts payable46,550

Total liabilities

72,810

Stockholders' Equity

Common stock

$38,510

Retained earnings

25,470

Total stockholders' equity

63,980

Total liabilities and stockholders' equity

$136,790

Budgeted data for the year 2017 include the following.

2017Quarter 4

Total

Sales budget (8,000units at $32)$76,800$256,000Direct materials used14,08062,500Direct labor12,50050,900Manufacturing overhead applied10,00049,170Selling and administrative expenses15,32075,000

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 $8,620 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 $10,290. $4,816 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 $8,260 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 $8,260. Unpaid income taxes at December 31 will be $7,770.

How do you find the Finished Goods Inventory, 1/1/17 and the Manufacturing Overhead Applied?